The Bloomberg Dollar Spot Index reversed early losses on a move fueled by the greenback’s rally versus the yen as risk sentiment improved across markets. As Treasuries erased their initial drop, the dollar rose to its strongest level versus the yen since May 16 at 113.59, on a firm rebound from its 112.83 Asia-session low. Weakness early on came as geopolitical concerns were at the forefront of traders’ minds and demand for safer assets prevailed. Most European stock markets started on a positive note, supporting a rally in euro-yen, before erasing their gains. Strong exporter supply near 113.50 caused the dollar’s rally versus the Japanese currency to lose momentum, according to traders in Europe and Asia. A close above the daily trendline resistance at 113.36 may open room for a test of the May 11 high at 114.37 as momentum studies signaled the move has legs. DeMark TD Sequential offered a note of caution as a sell setup series might be completed on Thursday, suggesting short-term losses. Investors will focus on U.S. durable goods and factory orders data before the release of the minutes of the Federal Reserve’s June meeting. While traders will keep an eye on any signs regarding the timing of balance sheet reduction, as that may delay the timing of the next rate hike, they will also look for clues on whether an increased number of policy makers were concerned over poor inflation growth. Should most Fed officials reflect Chair Janet Yellen’s view that they can look past inflation numbers and note improved financial conditions, and given the latest comments by policy makers over equity market strength, investors may need to move closer to the Fed’s dot plot.
