Forexlive Americas FX new wrap: Dollar index falls to the 3 year low

Author: Greg Michalowski | Category: News

Forex news for NA trading on January 12, 2018. 

A snapshot of the other markets at the end of the week is showing:

  • Spot gold up $16.14 or 1.22% at $1338.50
  • WTI crude oil futures $.68 or 1.07% at $64.48
  • US major stock indices closed higher (once again) and at record levels (once again).  For a look at the changes for the day, week and +YTD, CLICK HERE.
  • The US yields is ending the day with modest rises.  2 year 1.997%, up 1.9 basis points.  Five-year 2.3448%, up 1.9 basis points.  10 year 2.548%, up 1.1 basis points. 30 year 2.850%, -1.6 basis points
It is the day before a 3-day holiday in the US, and you might expect a quiet afternoon. That was not the case today. 

The dollar was kicked lower in the US afternoon trading with the EURUSD ending the day up about 160 pips and near the highs (dollar lower). The GBPUSD up 195 pips and near the highs (dollar lower), The USDCHF down -77 pips and near the low (dollar lower). The  USDCAD down -46 pips and near the low (dollar lower).  The USDJPY down -24 pips and near the lows. The AUDUSD up 24 pips and near the highs (dollar lower) after an down and back up day.  The only pair vs the dollar that did not do much was the NZDUSD.  

BTW the US dollar index dipped below the 91.00 level and in doing so, traded at 3 year lows (lowest since January 2015).  

All that dollar selling, sent gold prices up another $16.14. Oil also went higher.  

The US stocks seemed to like the idea of a lower dollar. It closed once again at record levels. The S&P and Nasdaq are up 8 of 9 days in 2018. The Dow has had 3 days (of 9) with gains of over 200 points.   

A lower dollar makes US goods abroad cheaper but increases the price of imports. Who cares about that?  There are tax cuts and inflation is still low despite the 1.8% rise in core CPI today which was higher than the 1.7% expectations. 

Who cares if wages are starting to go up?  We saw the likes of Walmart raise minimum wages, and top that off with a bonus.  

Well, the treasury market may mind. However, with German 10 year yields at 0.581%, how can the US 10 year at 2.546% not be a good deal?  That is a pretty good head start - yield wise. PS US 10 year yields at 2.54% are still higher than France, UK, Spain, Italy and Portugal 10 years (Italy is the highest at 1.98%).  Greece still has the US beat at 3.89%.    

Inflation may heat up and that may force the Fed to tighten more than expectations, lead to lower stocks and slow the economy.  But until then, shouldn't the dollar go up, not down?  HMMMM.  Makes you want to pay more attention the charts.....

Hoping you all have a great weekend....