US DOLLAR STRENGTH CONTINUES AFTER FRIDAY’S BULLISH ENGULFING

Last week was another rough outing for the US Dollar, as the US currency sank to another fresh three-year low, even as inflation out of the US came-in above the Fed’s target of 2% for the fifth consecutive month. Normally, a print of this nature would equate to some element of strength in the representative currency as markets factor-in a higher probability of increased rates on the basis of that new, higher inflation. But – not only did that not happen last week; but that US inflation print appeared to trigger the opposite – aggressive selling in the Greenback until buyers came-in to produce a Friday rally off of the lows. That Friday rally was rather impressive, producing a bullish engulfing candlestick that has, thus far, continued to help produce gains in the early-portion of this week.

US DOLLAR VIA ‘DXY’ FOUR-HOUR CHART: FROM FRESH LOWS ON FRIDAY TO EARLY-WEEK RALLY

FOMC MINUTES SET TO BE RELEASED ON WEDNESDAY

The big item out of the United States this week is the release of FOMC minutes on Wednesday. While this could bring some volatility into American markets, the January Fed meeting had no major announcements or changes, so it’s not likely that we’ll see any pulse-ripping trends here. However, the minutes being released are from Chair Yellen’s final meeting atop the bank and there could, perhaps, be some items of interest for markets.

Notable from the final Yellen meeting at the FOMC is how equity markets reacted. Equities sold-off the day before the FOMC announcement, and then produced a Doji on Fed day. After hanging on the ropes on the following Thursday, Friday delivered a punch that we still haven’t fully recovered from.

S&P 500 DAILY CHART: US STOCKS YET TO RECOVER TO JANUARY FOMC LEVELS

JAPANESE INFLATION, ECB MINUTES HIGHLIGHT THIS WEEK’S ECONOMIC CALENDAR

Outside of the States, there are a couple of key economic releases for FX traders to work with. Thursday morning brings ECB meeting minutes from the February meeting, and later that night (Friday morning in Asia), we get Japanese inflation for the month of January.