The US dollar is currently mixed. The dollar is higher against the euro and the Japanese yen, while selling off against the Australian dollar and the Canadian dollar. Yesterday, the dollar weakened primarily as a result of relative strength in the euro and the Canadian dollar. Today, moves in the dollar are classic signs of the "risk-on" trade. Following a recent speech by Chinese President Xi Jinping, fears of a trade war are falling.
Speaking at the Boao Forum, President Xi outlined plans to significantly open up the economy. Specifically, he promised to "significantly" lower import tariffs on US autos, decrease tariffs on other products, and better enforce the intellectual property rights of foreign firms. While China has promised to open its economy in the past, the most recent announcement was greeted by enthusiasm in financial markets. Risk-sensitive assets such as the Australian dollar surged, while safe haven assets including the yen have been selling off. As a whole, the dollar is only slightly higher this morning. Our short-term outlook on the dollar is neutral, while our medium-term outlook remains bearish.
USD/JPY is up today and currently trading above 107.10. EUR/USD is flat and trading above 1.2310. The pound is up slightly, and GBP/USD is currently above 1.4140.
Looking at US economic data this week, traders will be watching inflation data. Later today, we'll see producer prices for March. On Wednesday, the most important day, we'll see the consumer price index for March. On Thursday, we'll see initial jobless claims. On Friday, we'll hear a speech from the Fed's Bullard and see consumer sentiment figures for March. Last week, non-farm payrolls figures missed expectations by a wide margin.
As the dollar gains strength, we are upgrading the dollar to neutral in the short-term. Note that the currency is now trading within normal conditions in the short-term time frame. Our analysis is based on various technical indicators when looking at a daily chart of the US dollar index.
Thanks to recent dollar weakness, we are downgrading the US dollar to bearish. Note that the currency is trading within normal conditions. This is based on technical indicators when looking at a weekly chart.