Giles Coghlan LLB, Lth, MA
Financial Source
The USD is the currency that all others revolve around. Understanding that is a key concept to grasp early on in your trading experience. The moves in the major pairs over the last few weeks have mainly been dollar-driven. Specifically, it has been a weaker dollar on the huge stimulus measures out of the US and the virtually unlimited QE programme. All this has resulted in the present dollar weakness which has been driving the major pairs higher. So, here are a couple of practical applications to take away and apply to your trading.
Firstly, when you are trading major pairs, always look at the US dollar Index. The overall USD strength or weakness will help show you the near term expected direction in the major pairs. Here is a setup below that you can use. The Dollar Index is in the bottom right of the charts and all the majors are visible at a glance. It is helpful to lay out the major pairs alongside the Dollar Index like this:
Secondly, whenever you are trading the EURUSD remember that the DXY and EURUSD always move in the opposite direction. DXY up, EURUSD down. EURUSD up, DXY down. This is why the Dollar Index is also known as the 'anti-EURUSD index'. (check out the below chart - DXY orange line, the candlestick chart is the EURUSD). So, this means that you never want to be trading the EURUSD higher if the DXY is moving higher and vice versa.
Grasping the USD focus of the FX world is extremely important to understand. You can use this lesson to improve your handling of the major pairs and in particular the EURUSD pair.
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Editors’ Picks
EUR/USD off highs, back to 1.1850
EUR/USD loses some upside momentum, returning to the 1.1850 region amid humble losses. The pair’s slight decline comes against the backdrop of a marginal advance in the US Dollar as investors continue to assess the latest US CPI readings.
GBP/USD advances to daily tops around 1.3650
GBP/USD now manages to pick up extra pace, clinching daily highs around 1.3650 and leaving behind three consecutive daily pullbacks on Friday. Cable’s improved sentiment comes on the back of the inconclusive price action of the Greenback, while recent hawkish comments from the BoE’s Pill also collaborates with the uptick.
USD/JPY edges up above 153.50 with all eyes on US CPI figures
USD/JPY appreciates above 153.00 but remains on track for a 2.4% weekly loss. Trading volumes remain subdued on Friday, ahead of the IS CPI release. The Yen remains supported by hopes of a stable government and calls for further BoJ tightening.
Editors’ Picks
EUR/USD off highs, back to 1.1850
EUR/USD loses some upside momentum, returning to the 1.1850 region amid humble losses. The pair’s slight decline comes against the backdrop of a marginal advance in the US Dollar as investors continue to assess the latest US CPI readings.
GBP/USD advances to daily tops around 1.3650
GBP/USD now manages to pick up extra pace, clinching daily highs around 1.3650 and leaving behind three consecutive daily pullbacks on Friday. Cable’s improved sentiment comes on the back of the inconclusive price action of the Greenback, while recent hawkish comments from the BoE’s Pill also collaborates with the uptick.
Gold surpasses $5,000/oz, daily highs
Gold is reclaiming part of the ground lost on Wednesday’s marked decline, as bargain-hunters keep piling up and lifting prices past the key $5,000 per troy ounce. The yellow metal’s upside is also propped up by the lack of clear direction around the US Dollar post-US CPI release.
Crypto Today: Bitcoin, Ethereum, XRP in choppy price action, weighed down by falling institutional interest
Bitcoin's upside remains largely constrained amid weak technicals and declining institutional interest. Ethereum trades sideways above $1,900 support with the upside capped below $2,000 amid ETF outflows.
Week ahead – Data blitz, Fed Minutes and RBNZ decision in the spotlight
US GDP and PCE inflation are main highlights, plus the Fed minutes. UK and Japan have busy calendars too with focus on CPI. Flash PMIs for February will also be doing the rounds. RBNZ meets, is unlikely to follow RBA’s hawkish path.
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