Dollar Starts the Week on a High Note

 

In a relatively quiet European trading session the greenback moved higher versus the majors as a host of US central bankers will be on the speaking circuit today.

The dollar was bid in a relatively slow European trading session with a lack of data releases on the calendar. At lunchtime in London, the EUR/USD was down at 1.4438 from its opening week price of 1.4480. Last week's interest rate increase by the ECB and talk of central bank diversification out of dollars has kept the euro buoyant. Friday's low of 1.4380 followed by 1.4250 should serve as support levels with an initial target at the January 2010 high at 1.4280.

The GBP/USD was trading at 1.6347 from 1.6376. Tomorrow key CPI y/y data will be released and anything at or above the expected outcome of 4.4% should be a catalyst for the pound as strong inflationary pressures may force the BOE to raise interest rates as early as its next meeting in May. Support is found at 1.6250 followed by 1.6090. To the upside, Friday's high at 1.6426 will be followed by 1.6460 with a target of 1.6880 from the November 2009 high.

The USD/JPY was relatively unchanged as the dollar failed to hold its gains from the last minute budget compromise. Bank of Japan Governor Masaaki Shirakawa said the Japanese economy will remain under pressure as the country moves to recover from the earthquake and tsunami. USD/JPY support is located at 84.50 followed by 84.00. Resistance is at 85.50 with a target of 85.90.

This afternoon the dollar may give back its gains as FOMC member Janet Yellen will be on the speaking docket at 16:15 GMT. Yellen, a known dove on inflation and a strong Bernanke supporter should expand on her dovish opinion when she was previously quoted as saying, "In my personal opinion, economic conditions do not yet call for the Fed to exit from unconventional monetary policy." This could lead to further dollar weakness in line with the long term trend following the implementation of the Fed's quantitative easing program.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

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