Has Dollar Turned The Corner?

After relentless selling for the past month which culminated in a spike top of 1.5900 at the start of trade this week, the EURUSD dollar finally turned the corner dropping below 1.5500 by Good Friday. As we wrote in our daily, “The market appears at a standstill as EURUSD consolidates its gain in the 1.5300-1.5500 area and traders wait for the next theme to develop. The collapse of Bear Stearns has left the market wary, but with no additional news of serious trouble in the US financial system, dollar shorts have run out of fresh reasons to sell the greenback. Meanwhile evidence of a potential slowdown in EZ economy is starting to mount, raising concerns that ECB may have to shift its hawkish posture relatively soon”.

Has Dollar Turned The Corner?

After relentless selling for the past month which culminated in a spike top of 1.5900 at the start of trade this week, the EURUSD dollar finally turned the corner dropping below 1.5500 by Good Friday. As we wrote in our daily, “The market appears at a standstill as EURUSD consolidates its gain in the 1.5300-1.5500 area and traders wait for the next theme to develop. The collapse of Bear Stearns has left the market wary, but with no additional news of serious trouble in the US financial system, dollar shorts have run out of fresh reasons to sell the greenback. Meanwhile evidence of a potential slowdown in EZ economy is starting to mount, raising concerns that ECB may have to shift its hawkish posture relatively soon”.

Next week the calendar hardly looks friendly to the dollar as nearly every event from Existing Home Sales to U of M Confidence survey are expected to print lower that the prior month. However, after so much bad news, the greenback may benefit from diminishing expectations staging a rally simply if the data does not show any further deterioration. In any case the market appears to be trading less on economic news and more on risk version concerns. If currency traders see some stabilization in US financial sector some flows may return to the buck, on pure short covering dynamics alone. Therefore, while the rally in the dollar may continue, for the time being it is still nothing more than a correction in ongoing bear market.