Dollar stays on the backfoot to kick start the week

The suggestion over the weekend from US commerce secretary Lutnick was that tariffs against Canada and Mexico will go ahead as planned. However, it might not be the 25% tariffs touted initially with perhaps some wiggle room to be watered down. That saw the dollar open lower today and we’re seeing that hold since Asia trading.

The euro is the main beneficiary, getting a slight nudge higher as well after the latest Eurozone inflation numbers. EUR/USD is now up 0.6% to 1.0535 though sellers are still keeping in near-term control as seen from the chart:

That indicates while the dollar is down on the day so far, it is still not surrendering most of its momentum from the latter stages last week. The 100-hour (red line) and 200-hour (blue line) moving averages at 1.0450-56 is a crucial spot to watch for the day ahead now in the case of EUR/USD.

Besides that, we’re also seeing GBP/USD move up by 0.4% to 1.2630 and brushing against its key hourly moving averages:

At the same time, the 100-day moving average for the pair is also seen at 1.2630. So, this adds another major technical layer to the key hourly moving averages at 1.2630-32 above. Keep below and sellers will still maintain a more bearish control for the pair. But break above and buyers will start to seize more near-term control to stick with the upside run since January.

Elsewhere, other major currencies are not too much changed against the dollar. USD/JPY is down 0.1% to 150.40 while USD/CAD is down 0.2% to 1.4430 currently. On the latter, large option expiries at 1.4440 might be offering something to keep price action stickier before we get to US trading later.

Trump’s plans on tariffs against Canada and Mexico will be the key risk event to watch alongside US ISM manufacturing PMI data. On the week itself, there will be no shortage of major events with China’s two sessions meeting, the ECB monetary policy meeting, and US jobs report also all lined up.

This article was written by Justin Low at www.forexlive.com.