The US dollar continues to get thrown around in the early hours of Monday, as the markets are trying to figure out what is going to happen next with the tariff drama. At this point in time, the yields in America falling seems to be one of the bigger drivers of price action.
The euro found itself all over the place early during trading on Monday, initially spiking but now looking like it’s giving back some of those gains. I think at this point, what we can expect to see probably in most markets, but in this one in particular, is a lot of erratic sideways trading. Quite frankly, depending on what time of the day you’re trading you may or may not make money going to the long side or the short.
There’s probably a little bit of something for everybody here and therefore you need to understand that position sizing will matter. And of course, you will have to be very cautious, and use stop losses aggressively. Taking profit quickly might be the way forward. Right now, it looks like the 1.09 level is trying to act down on this as a bit of a floor.
The US dollar fell against the Japanese yen right away, but it is starting to make a comeback. Because of this, I think you could see a little bit of a relief rally. We’ll just have to wait and see. Because, of course, the Japanese yen is considered to be a safe currency, and therefore, people will be paying close attention to it. But I also recognize that the interest rate differential favors the US dollar despite the fact that rates have been dropping as of late. Expect a lot of choppy volatility. I suspect that we will probably limit momentum in either direction until we get some type of clarity with tariffs.
The Australian dollar has turned things back around, but quite frankly, from an extraordinarily oversold point. So, I think this is going to end up being a bit of a relief rally. Whether or not it can actually continue much higher remains to be seen, but I do think you’ve got a scenario here where traders may try to drive the Aussie dollar back up to the 0.62 level, where you would expect to see a lot of resistance.
For a look at all of today’s economic events, check out our economic calendar.
Chris is a proprietary trader with more than 20 years of experience across various markets, including currencies, indices and commodities. As a senior analyst at FXEmpire since the website’s early days, he offers readers advanced market perspectives to navigate today’s financial landscape with confidence.