US Dollar rebound


Currency traders were caught slightly off guard on the release of the Institute for Supply Management's (ISM) manufacturing index for February showing a rise to 56.7 against expectations of 55.6 after January’s 54.8 reading. The mad scrambling to liquidate long currency positions against the US Dollar, showed just how ‘one way’ short term traders were. With short term objectives within touching distance, the turnaround was short and sharp. The Euro reached a high of 1.1975 before plunging to 1.1890 and closing the day at 1.1915. With tomorrows European Central Bank ( ECB ) meeting unanimously expected to raise rates .25 pct and so already priced in, any comments after the meeting will be keenly watched. The Euro currency bulls have rather had the wind taken out of their sales by today’s action and may well stand aside. In such circumstances it would not be surprising to see the US Dollar peg the Euro back to the 1.1860 level. It would need a trade back to 1.1810 to scare the Euro bulls away for a while. The British Pound has closed a full 100 pips below the high for the day at 1.7590. The low of 1.7460 was knocking on the support door. Any move below this support level would take traders back looking for 1.7370 then 1.7310. The USD/CHF touched a low of 1.3035, within a cuckoos spit of the Swiss Franc bull traders objective of 1.3010.The swing back took the currency all the way back to 1.3175 before closing the European session at 1.3130. A break at either 1.13160 or 1.3110 will give an indication of the direction of the next move. The Japanese Yen was unaffected by all the European volatility and continued to trade in a narrow range around the 116.15 level. The Canadian Dollar inched higher against the US Dollar seeing a trade at 1.1335 before settling back to a more comfortable 1.1350 for the day. Further improvement for the loonie over the coming days is high on the agenda.