FXStreet (Guatemala) – Mark Chandlar, analyst at Brown Brothers Harriman explained that the gyrations in the foreign exchange market spurred by the panicked response to Chinese machinations may have been the last spasm before the summer doldrums grip the dollar.
Key Quotes:
“The Dollar Index had its worst week in nearly two months, but all that really happened was that it moved to the lower end of its ranges. The recent string of US economic data suggest that Q2 growth is closer to 3.0% than the 2.3% of the most recent estimate, and that Q3 has begun on firm footing.
The speculative market and many investors are long dollars in anticipation of a Fed hike in September. Even some who harbor strong doubts do not want to have to explain how they were short dollars when the Fed hiked rates. They seek, as the saying goes, to “minimize their maximum regret.” This does not rule out dollar losses, but they are likely to prove limited in magnitude and duration.
It is also possible for shocks to disrupt, but Greece seems well on its way of a third assistance program. Although few if any give it high odds of succeeding to put the country on a more competitive and sustainable path, it no longer poses an existential risk. This can change but is unlikely to in the next several weeks. After disrupting the capital markets last week, Chinese officials in word and deed appear to be stabilizing the market. The economic data calendar is also relatively light, and in any event, it is unlikely to dramatically alter macro-views.
Specifically this means that euro’s range following China’s move may contain the bulk of the price action in the days ahead. That range is $1.1025 to $1.1215. The technical indicators are somewhat supportive, but the top seems fairly secure.”
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