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Government Shutdown Buoys Dollar

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Government Shutdown Buoys Dollar

The fiscal brinkmanship in the US has put pressure on riskier currencies and on Friday the dollar was able to gain traction. Traders have moved into safe haven assets as long term US yields have benefited from the government shutdown.

There has been very little movement in the currency markets during the course of the week. The yen is the second strongest currency on the week. The BOJ concluded its two-day meeting and left its economic assessment and stance unchanged.

US congressman have been unable to come to a deal that will allow the US government to reopen. The republicans continue to ask for negotiations as they want to tie the continuing resolution to a defunding of the Affordable Care Act. The public continues to blame the house republicans for the shutdown, which should eventual put pressure on the house to push for an resolution.

UK data continues to be stronger than expected. On Thursday, the UK service PMI printed a reading at 60.3 from 60.5, which was above the 60.0 consensus estimate. Auto sale,released on Friday, climbed more than 12% in September, the 19th consecutive monthly gain.

Euro Break Out

The EURUSD currency pair moved above resistance and is poised to test the weekly highs near 1.37. Short term support for the currency pair is seen near the 10-day moving average at 1.3535, which coincides with the breakout level.

Momentum on the EURUSD currency pair is pointing higher, but the trajectory of the MACD (moving average convergence divergence) index is flattening. The RSI (relative strength index) which is an oscillator that measures overbought and oversold levels has come down from the 71 level, and is printing near 67, which is on the upper end of the neutral range.

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