It looks like today will be a touchstone day for understanding market sentiment as to whether the trend of the dollar’s depreciation will continue. Dollar buying intensified immediately after the release of last weekend’s U.S. jobs report, which surpassed expectations in the number of employees. However, there is a history of being pushed back by dollar selling pressure after the weekend.
However, at the beginning of the week, the US ISM non-manufacturing business index showed unexpected strength, prompting a reaction to dollar-buying, which continues to this day. There is a mix of times when the market reacts to indicators honestly and times when it is pushed back by corrections, and it seems that the market development is becoming difficult to deal with.
The US trade balance will be announced today. The market is forecasting a deficit of $80 billion for October, a smaller deficit than the previous deficit of $73.3 billion in September. However, the reaction of the dollar exchange rate to the outcome of the trade balance is difficult to predict. The United States is running a trade deficit due to brisk consumption. Expanding the deficit does not necessarily lead to a weaker dollar. Rather, it is assumed that the dollar will be bought as consumption is recovering. The problem is what’s inside. If the deficit widens while both imports and exports are increasing, economic activity will be seen as brisk and will likely be received favorably. It is assumed that contraction will react in the opposite way as inactivity.
With growing nervousness about the trend of a weaker dollar, will the trade balance announcement trigger a stronger or weaker dollar? It’s an interesting indicator to gauge market sentiment, as it’s a relatively low-profile indicator.
It was unexpected that dollar buying has revived so far, but the dollar selling perspective continues. Today, we will pay attention to movements after the US trade balance.
Yesterday’s USDJPY selling has already stopped out and is currently no position.
