"The dollar-positive afterglow from Friday’s strong US payrolls report lasted into the Asia session on Monday. EUR-USD is now firmly back on the 1.30 handle, and both AUD and NZD are struggling. This is partly due to the absence of overnight drivers given the empty calendar. But there are forces at work too – it is becoming increasingly clear that the psychology around the US dollar is changing," says a morning currency note from UBS.
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Robert Stewart at spread betting strategy providers LS Trader notes, "the dollar index advanced for the second consecutive week, this time gaining 0.78%. This move was once again facilitated by advances against the ended the Euro, Pound and Japanese yen.
"We wrote last week that we were still looking for a move higher to 8200 in the USD/JPY and that should that level be taken out that 8500 would come into focus and that is the case now since 8200 resistance was cleared on Friday."
A crucial point to observe with regards to the US dollar, and currency dynamics generally, is that "the dollar no longer strengthens only in the presence of risk aversion and now stronger US economic data is just as likely to do the trick," note UBS.
This change in character paves the way for further dollar gains over the coming months as market expectations for further Fed easing recede.
Friday’s IMM positioning data shows that a longer term structural change seems to be taking hold: net dollar positioning has now been in long territory for 25 consecutive weeks – a pattern we have not witnessed since 1999.
Looking ahead to this week, four policy meetings lie ahead.
Analysts expect no change in the Fed’s policy stance on Tuesday, and nothing material from the BoJ either.
Norges bank meets on Wednesday and, although we look for no change to the policy rate, Governor Olsen is not likely to waste an opportunity to try to talk down NOK.
On Thursday, the SNB is very likely to keep the EURCHF floor unchanged at 1.20. Eurozone finance ministers and the IMF will likely need to sign off on the entire second Greek bailout plan this week – the finance ministers meet today, and the IMF executive board on Thursday.