A new hectic week is unfolding and the dollar is putting its foot down from the start, assuring that the US dominance is to be of the essence with class A fundamentals on the queue.
New revelations have been seen, and though the outlook is rather unchanged, the sentiment is the main driver for the day and all week as investors are eyeing new clues over the outlook.
The dominance was for greenback, as the gains continued to spread against its major rivals driving the euro, sterling and the yen lower, which were also affected by their own suppressing agents!
Starting with greenback, the federal currency is already boosted by the recovery prospects and fourth quarter GDP figures on queue for the week, where the expansion is expected to have quickened in the last three months of the year opposed to what was seen globally as growth trended lower.
Not just that, but the FOMC's first decision for the year is on the watch list, though highly likely to remain intact with rates and monetary policy as the Feds continue their quantitative easing. While also President Obama's State of the Union in Tuesday is attracting observers for expected new stimuli measures to be announced which all are favoring a strong dollar on prospects for ongoing recovery.
The dollar index which gauges greenback's performance versus its six major trading partners trended to the upside over the day, trading at the time around 78.44 after setting the low of 78.13 and the high of 78.50. The index is trading within oversold areas over daily basis and signs of reversal are still not confirmed though started to signal to the upside over intraday basis with RSI moving higher and so is Stochastic especially over four-hour basis and good fundamentals this week and this dollar frenzy will surely help the index rise especially with this positive momentum.
As for the common currency, the dollar strength suppressed the moves, especially as the positive fundamentals from Europe failed to lift the currency. The industry reports today were rather cheerful with the advanced January estimates for Services and Manufacturing continuing the expansion easing some of the woes.
The pair slipped to trade at the lowest of 1.3538 and currently hovering slightly above at 1.5360 areas after setting the high of 1.3641. The prospects for the euro still remain bullish for the week as far as the pair tests successfully 1.3425 areas and remain steady above to revitalize the bullishness this week towards 1.3830. The bullishness is in favor after the dollar dominates the sense and as far as the aforementioned areas are stable, where investors are surely limiting their bearish expectations on the euro with future traders shorts falling as the euro areas sustains the recovery and continues the measures to contain the debt crisis.
Meanwhile, for sterling, the deadlock prevails with the GDP figures tomorrow expected to show growth decelerated in the last quarter and expected at 0.5% though I wouldn't be surprised to see weaker growth figures by the final revision as the economy lost some steam and if supported was with spending ahead of the VAT increase which was activated with the start of the year.
The economy is slowing and inflation is racing and expected to leap above 4.0% which is signaling stagflation and need for the BoE to move to protect the economy which is weighing on the royal pound especially as the BoE minutes are expected to reveal nothing new and no breakthrough as the impasse among MPC members prevail.
Sterling traded bearishly versus greenback today, as the pair remains affected by the prevailing fears and the dollar strength, though as the week unfolds the technical outlook remains bullish for sterling. The pair declined pressured by the negativity on momentum indicators to test 1.5920 areas and attempting to return to the upside after leaving the intraday high at 1.6009. The pair is expected to return to the upside this week targeting 1.6185 then 1.6250 but only with stability above 1.5835, while also breaching 1.5920-10 will delay the upside targets for the week.
As for the Japanese yen, it also surrendered to the dollar, despite that stocks turned lower in Europe after the gains in Asia, where lower than expected profit from Philips pressured the market to the downside. The pair is trading to the upside and the yen is weak ahead of the early BoJ decision tomorrow where the bank is expected to continue its dovish monetary policy and with the purchases programs and low rates to support the weak recovery and prevent deflation.
The pair is currently hovering around 82.80 areas recording the high of 82.92 and the low of 82.51; as far as areas of 82.75 remain intact today and the daily closing prevails below those areas the bearishness remains valid targeting initially 81.05 areas this week.