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Short-Covering Drives Dollar Lower, Fundamentals Remain Positive

July 4, 2013 at 0:09 by Vladimir Vyun

The US dollar dropped today ahead of Friday’s important report. Many analysts think that it was nothing but short-covering and the currency can yet rally on fundamentals that remained positive.

The dollar fell ahead of non-farm payrolls that will be released on July 5, but the trading environment is still favorable for the US currency. The employment report of Automatic Data Processing showed an increase by 188,000, which has beaten analysts’ expectations by a wide margin. Such data suggests that the payrolls will also show a significant improvement of employment.

The risk sentiment was also supportive for the dollar’s role as a safe currency. Political turmoil in Portugal as well as unrest in Egypt made investors to seek safer assets.

EUR/USD rallied from 1.2976 to 1.3016 after dropping to 1.2922 and GBP/USD went up from 1.5152 to 1.5280 as of 23:57 GMT today. USD/JPY declined from 100.61 to 99.78.

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