The Dollar is Weak: Here’s Why

The Dollar is weak, here’s why.

Anyone who has been checking the currency strength meter in the last week will have noticed consistent weakness in the US Dollar.

And it’s a similar story for the Japanese yen (JPY) and Swiss franc (CHF) too.


Because these are all safe haven currencies.

The market generally tends to be in 1 of 2 states:

Risk on or Risk off

Right now the market sentiment is ‘risk on’. Traders are optimistic about a more encouraging outlook in the aftermath of the Coronavirus. As a result investors are moving money out of safe havens and into riskier assets.

You are literally watching money pouring out of the USD, JPY & CHF into riskier assets such as AUD, NZD & CAD.

The opposite is true when the risk tone is ‘risk off’. In this state money flows into the safe havens (USD, JPY & CHF) and out of riskier assets (AUD, NZD & CAD).

This process repeats again and again and can change on a daily basis.

Why is this important?

If we know the overall risk tone we can drastically increase our chances of success by trading in line with the risk flows in the market A.K.A the smart money. 

Trillions of dollars flows through the market each day. To trade in the opposite direction would be crazy.

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JPY is the Strongest, AUD & NZD are Weakest

Damage control sees the Japanese Yen soaring after the killing of Iranian military leader.

– Japanese Yen, up 9.32%

– New Zealand Dollar, down -4.99%

– Australian Dollar, down -3.89%

Looking back at a the last 5 days of trading the Japanese Yen (JPY) is the strongest currency which soared even higher today after the United States ordered the killing of Iranian military leader Soleimani. The event sent traders into panic mode with gold rallying, US yields falling, crude oil surging and stocks falling.

The end result sees the Japanese Yen is up 9.32% since the same time last week.

It is possible the risk-aversion by traders could continue – even more so, as the futures on the S&P 500 are now reporting a 0.6% drop. The index futures were up more than 0.19% in the Asian session.

In addition to this, oil prices on both sides of the Atlantic have picked up strong bids with heightened geopolitical tensions and could impact on the emerging market risk assets, adding to the bullish pressures around the Japanese Yen.

British Pound Soars After Record Defeat at the Polls

Cable sees its largest rally in the GBP/USD pair since January 2017.

– British Pound, up 10.61%

– US Dollar, down -3.91%

– Japanese Yen, down -11.51%

The British Pound (GBP) is the strongest of the major currencies after the resounding victory by Prime Minister Boris Johnson and the Conservatives in the UK general elections. The Australian Dollar and New Zealand Dollar are the only other currencies that are higher today but they are lagging way behind the Pound Sterling. The resulting price move is the largest rally in the GBP/USD pair since January 2017.

With UK politics turning out to be an exclusive driver of the sentiment surrounding the British Sterling, the US dollar price dynamics did little to influence the pair’s latest momentum.

To take advantage of the current situation, we are waiting for the US economic docket, highlighting the release of monthly retail sales data for some short-term positions before the markets close at the end of the trading day.

US Dollar Continues to Weaken

The United States Dollar is now the 2nd weakest of the major currency pairs.

– US Dollar, down -3.95%

– Japanese Yen, down -4.05%

– New Zealand Dollar, up 9.19%

The United States Dollar continued to move lower last week and is now the 2nd weakest of all the Forex majors (only behind the Japanese Yen). The US Dollar is down versus all the major currencies with the exception of the Yen.

Looking at the change in price since the markets close last Friday, we are seeing that the dollar is trading at or near extremes versus all the major currencies.

Remember, you can continue to monitor all 8 currencies using our free currency strength meter which scans 28 Forex pairs and is updated every 5 minutes.

JPY is the strongest currency this week and the CHF is the weakest

Last week the US Dollar rose against all the majors with the exception of the Japanese Yen and the New Zeland Dollar.

– Japanese Yen, up 3.51%

– Swiss Franc, down -3.87%

Currency Quake’s strength meter reveals that the Yen was the strongest currency, meanwhile the Swiss Franc was the weakest. It’s an unusual setup since the two currencies typically move in a risk on/risk off parallel directional move.

The United States Dollar became stronger this week with only mild declines versus the Japanese Yen (-0.14%) and the NZD (-0.03%). The US Dollar gained the most strength vs the Swiss Franc this week (+0.79%).