DXY: Will the dollar appreciate despite soft US macro data?
Fawad Razaqzada June 16, 2017 12:52 PM
In the US, incoming economic data has been rather weak recently. Both employment and inflation figures have been soft this month. Today we had weaker-than-expected readings on building permits and housing starts, while the UoM Consumer Sentiment also missed the mark. The dollar weakened but didn’t fall of a cliff. That may be because of what the Fed had announced on Wednesday: that the soft patch in economic data is transitory and that this won’t stop the central bank from tightening its belt further. What’s more, a dovish Bank of Japan and European Central Bank has helped to support the dollar with USD/JPY and EUR/USD showing possible reversal signs in their respective bearish and bullish trends. Thus, the dollar may be able to appreciate despite the weakness in US macro figures. However if things start to turn ugly then market participants may price in the possibility that the Fed may actually be wrong in its forecasts about the US economy. For now though, investors are giving the Fed the benefit of the doubt – only just.
But after a busy week of fundamental events, next week is set to be a quieter one in terms of economic data. There is however one more key central bank meeting to look forward to as the Reserve Bank of New Zealand makes its policy decision on Wednesday, albeit no change is expected to be announced. Eurozone PMIs will be among next week's key data, due on Friday. From North America, Canadian retail sales (Thursday) and CPI (Friday) are among the highlights, while in the US there's nothing significant scheduled apart from a few second-tier macro pointers here and there.
The Dollar Index managed to form a potential reversal pattern following a hawkish Fed meeting on Wednesday. It created a hammer candlestick pattern at around the 61.8% Fibonacci retracement level after the break below the prior low at 96.50 proved to be a false move. So we may have seen a reversal pattern unfold for the dollar index, similar to what had happened at the turn of the year at around 103.55, which marked the end of the dollar rally. However if the DXY were to hit a new low on the year in the coming days then all the bullish bets would be off.
Source: eSignal and FOREX.com.
More From Fawad Razaqzada
- Dollar all over the place as risk appetite turns sour June 27, 2017 12:52 PM
- Threat of deflation gone: Draghi sends euro surging June 27, 2017 8:14 AM
- See More
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.