DOLLAR EDGES UP AHEAD OF KEY FED SPEECHES

The dollar continued to soar today, with the dollar index reaching a high of 92.68. The surge in the dollar came as investors increased their bets that the Fed will do at least two or three more rate hikes this year following last week’s statement. Traders are looking forward to the CPI data that will be released on Thursday. They are also looking forward to statements by Fed bosses today at the Atlanta 23rd annual financial markets conference. Atlanta Fed boss, Raphael Bostic, Dallas Fed’s Robert Kaplan, and Chicago Fed’s Charles Evans will address the gathering. Richmond Fed’s Thomas Barkin will also speak at the George Mason University in Virginia later today. These speeches will give traders an insight to their thinking before the minutes of the previous meeting are released.

The NAFTA negotiations are scheduled to start today in Washington. This is expected to be the most important negotiation so far, with the three sides expected to introduce hardline strategies. The discussions in Washington will focus on the rules of origin, dispute resolutions, and sunset clauses. The rules of origin clauses refer to the percentage of a car that should be manufactured in the region to avoid tariffs. The negotiations are expected to be tough because each side is expected to come up with victories to show to the electorate in the coming elections.

Bank of Japan released the minutes of the previous MPC meeting. The minutes showed that some officials in the committee were concerned about abandoning the easy money policies too soon. The major concerns were that inflation was not going up as fast as expected and that the cloud over US trade policies was still hanging around in the market. They were also concerned about the strength of the yen against the dollar which has impacted the local market.

EUR/USD

The pair continued the downward momentum, reaching a multi-monthly low of 1.1915. The downward momentum came as the dollar continued to strengthen, ahead of key speeches by Fed officials. The RSI of the pair is currently at 25. It has been in this level for more than a week now. This is an indication that the pair could reverse this week as short sellers exit their positions. This is also evidenced by the Bears power indicator as shown below.

USD/CAD

The USD/CAD gained today to reach an intraday high of 1.2876. The pair rose in line with the dollar strength. The rise was also attributed to the NAFTA negotiations which will start today. While Trump has shown flexibility on the deal, he has also vowed to end the deal if he does not get what he wants. Already, he has said that Canada and Mexico will not be exempt from the steel and aluminum tariffs. He has also moved to add other clauses on immigration in the deal. In recent days, the pair has been quite volatile, with prices ranging between 1.2917 and 1.2800.

USD/JPY

Last week, the USD/JPY pair fell from a high of 110.03 and reached a low of 108.6. Today, the pair rose after minutes from the BOJ showed that some committee members were concerned about exiting the easy money environment. Previously, Kuroda had indicated that they would start normalizing in April next year. The pair is now trading at 109.3 and trend indicators show that a new upward could be forming.