Dollar Remains Near Session Low as Market Looks to Yellen Speech – 10 April, 2017

The dollar declined versus all its G-10 peers amid muted flows, as traders looked toward an afternoon speech by Federal Reserve Chair Janet Yellen for cues on the currency’s direction.

“In recent months, typically, we’ve had some of the auxiliary policy makers like Dudley and Fischer lead the way and then it’s up to Yellen to corroborate those signals,” Wells Fargo currency strategist Erik Nelson said in an interview. If Yellen echoes New York Fed Chief William Dudley’s hawkish comments from last week, the speech could be dollar supportive, Nelson said, though there’s some risk for disappointment given Yellen’s often-measured tone.

• The Bloomberg dollar index remained near session lows after the dollar gained Friday despite weaker-than-expected non-farm payrolls data, with the index reversing gains of as much as 0.2% seen overnight. Easter holidays at the end of the week have nudged traders into a “watch and wait” mode rather than any urgent building of positions, several traders in London who asked not to be identified because they are not authorized to speak publicly said earlier.
• Yellen speaks shortly after 4pm ET Monday at the University of Michigan, followed by Q&A. Traders say that the short-term course for the dollar could hinge on signals regarding the timing and pace of future rate hikes amid an apparent delay in fiscal stimulus.
• At the same time, the outlook for the euro remains clouded as the French presidential election race evolves into a 4-way affair and after ECB’s Draghi last week signaled there’s no rush to withdraw quantitative easing.
• EUR/USD is trading at ~1.0602 after dropping as low as 1.0570 in earlier trading; EUR gains may be slowed by offers layered above 1.0600 that extend to 1.0620 and potentially beyond. EUR also may face technical resistance at 1.0624 from its 100-DMA, which provided support for the shared currency ahead of the payrolls report.
• USD/JPY is trading at ~110.90, near its session low at 110.81, after extending strong gains scored Friday to 111.58 in Asian trading as stop-loss buy orders were triggered. The reversal came as the 10Y Treasury yield and U.S. stocks fell to session lows; light stop-loss sell orders from weak longs were triggered as USD fell below 111.10 and 111.00, a trader in New York said. USD may find fresh demand under 110.50, a trader in Asia said, while technical support may be at the late March/early April lows ahead of 110.00.
• USD/CAD remains near session low of 1.3329 amid a rise in WTI crude. CAD gains come after Canada reported stronger-than-expected jobs growth Friday and as the Bank of Canada prepares to decide on rates Wednesday.

Source: Bloomberg