Resurgent dollar faces crucial week Resurgent dollar faces crucial week Resurgent dollar faces crucial week

Resurgent dollar faces crucial week

Forex 5 minutes to read
John Hardy

Head of FX Strategy

Summary:  The US dollar ended last week on a strong note, and the busy US economic calendar and series of Fed speakers this week could finally see some more volatility in the market and possibly a broadening dollar resurgence if the market continues to drive US yields higher.

President Trump was out at the weekend shaking his finger at Federal Reserve chair Powell once again in his, some would (and did) argue, unhinged performance in a rambling speech at the conservative political fundraising operation CPAC. This saw the US dollar opening for trade a bit weaker in early Asia after Friday’s rather strong close, but the move was largely erased into early European hours, discounting the context of the remarks.

Equities are in a positive mood to start the week on the latest noise that the US and China are set to announce a deal that would end most tariffs. Trump and Chinese leader Xi Jinping may meet as soon as mid-March to sign off on a deal. Chinese equities may be focusing on the MSCI reallocation bump of (from 5% of its emerging market indices to 20%) and domestic speculative interest more than hard data. Note the South Korean February Manufacturing PMI up overnight at a new cycle low of 47.2.

The chief factor driving the resurgent greenback over the latter half of last week, in our view, is a reassessment of how quickly the Fed is likely to follow through on its pivot away from a tighter stance on monetary policy as well as higher yields all along the US yield curve. USDJPY was the first major USD pair to “break” in a technical sense and we look for possible follow-through elsewhere this week after the extensive bout of indeterminate range trading in the majority of USD pairs.

The ISM Manufacturing on Friday slipped to a new low since late 2016, but let’s recall two things: first, that it still suggests expansion, and second, that manufacturing is far less important than the non-manufacturing sector. Back in 2007, the ISM Manufacturing never registered a single reading as high as this February number of 54.2; the non-manufacturing ISM survey in January was 56.7 – a level that it fell below in mid-2006 and never recovered until 2011.

The US didn’t fall into recession officially until early 2008. The February ISM Non-manufacturing survey set for release tomorrow.

Elsewhere this week, our primary focus will be on whether the US dollar can finally piece together a directional move, possibly motivated by an extension higher in US yields if the ISM non-manufacturing survey is benign and the US February jobs report on Friday is likewise supportive. As well, a possible dovish pivot from the Reserve Bank of Australia tonight and the Bank of Canada on Wednesday could also set the tone with policy divergence the driving theme.

A number of weighty Fed speakers out this week as well, with the NY Fed’s Williams out speaking Wednesday, Brainard of the Board of Governors on Thursday, and Powell on Saturday discussing “Monetary Policy Normalisation and Review”. We are all looking for hints on the Fed’s thoughts about its balance sheet reduction, or QT, schedule.

Trading interest

For USDCAD, looking to stay long for a go well above 1.3400 and moving stops up to 1.3220.

For AUDUSD, looking for partial short positioning ahead of the RBA in spot or via options and then looking to add shorts if the RBA delivers with a dovish tilt and the price action shifts below 0.7050.

EURGBP: staying short for a go well below 0.8500 with stops above 0.8640.


The Aussie looks rather heavy, given the positive outlook for a US-China trade deal and ebullient Chinese markets, but the focus is squarely on the domestic housing market and it may finally be time for the RBA to raise the white flag and execute a more profoundly dovish pivot that takes the Aussie down a few notches. The technical focus here is on a hold below the 0.7000 level for a test of the post-GFC low below 0.6900 (not including the flash crash lows in AUD pairs).
Source: Saxo Bank
The G10 rundown

USD – the greenback partially resurgent and a big week ahead for the economic calendar and potentially for Fed speakers as well. 

EUR – the single currency seems neutral to developments elsewhere – note the potential EURAUD range break. EURUSD trading ranges are barely detectable, but should expand this week if USD strength broadens.

JPY – USDJPY broke important resistance last week and could continue to trend higher this week if the US economic data and Fed speakers continue to drive higher US yields.

GBP – sterling modestly bid after the pro-Brexit faction of her party issued a list of terms for supporting a revised Brexit deal. Crunch time next week with the series of votes on whatever May is able to agree with Brussels.

CHF – continue to scratch our heads a bit at lack of CHF downside despite the higher US yields, strong risk appetite and weak JPY – EURCHF staying in impossibly tight range.

AUD - the January Building Approvals data show activity in the housing sector continuing to slow rapidly, down some 28.6% year-on-year. The RBA is up tonight and we look for a change of message to continue to drive AUD downside risk – 0.7000 in AUDUSD is a potential trigger for more selling flows if taken out.

CAD – another weak GDP number Friday has rates at the short end of the Canadian yield curve at new lows and USDCAD responds with a big jolt higher that wrenches the focus back to the upside for now.

NZD – largely simply tracking the AUD recently – watching AUDNZD with interest over the RBA for the risk of a final run lower in the pair toward the secular lows near parity.

SEK – the backdrop is SEK supportive in normal times, especially after last week’s data inspired new highs for the cycle in Swedish yields. Still prefer EURSEK to pivot back lower for a test of the 10.35-40 area, provided 10.55-ish holds.

NOK – the sharp sell-off in energy markets keeping EURNOK from developing any downside momentum for now – sitting on our hands for a NOK outlook at the moment. 

Upcoming Economic Calendar Highlights (all times GMT)

09:30 – UK Feb. Construction PMI
10:00 – Euro Zone Jan. PPI
21:30 – Australia Feb. AiG Performance of Services Index
01:45 – China Feb. Caixin Services PMI
03:30 – Australia RBA Cash Target

Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (
- Analysis Disclaimer (
- Notification on Non-Independent Investment Research (

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000

Contact Saxo

Select region


The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.