Market Looking to Data and Yellen for Clues

August 25, 2016

The Fed Chairman Janet Yellen, will make a speech at 14:00 GMT on Friday 26th August, which will influence the market sentiment and the strength of the dollar. Today we get a series of economic figures out of the US. Initial Jobless Claims (the week ended 19th Aug), Durable Goods Orders (MoM) for July, and Core Durable Goods Orders (MoM) for July, to be released at 12:30 GMT. Services PMI and Composite PMI, at 13:45 GMT.

Since FOMC’s dovish statement on last Wed 17th Aug, the New York Fed President Dudley, San Francisco Fed President Williams, and the Fed Vice Chairman Fischer made hawkish comments respectively. The conflicting of comments resulted in a confusion for the market and a choppy trend of the dollar. Yellen’s speech on Friday may give the market a clearer picture of the Fed’s likely measures.

The US Initial Jobless Claims fell by 4,000 to 262,000 in the week ended 12th Aug, marks the 76th straight week below 300,000, since the figure of 27th Feb 2015. Initial Jobless Claims have seen a downtrend since Apr 2009, indicating the increased strength of the US labour market.

Durable Goods Orders fell by a revised 4% in June, from a 2.2% drop in May. It was the biggest decline since Aug 2014, driven down by transportation equipment. Core Durable Goods Orders decreased by 0.5%, from a 0.3% drop in May, a second straight fall.

Services PMI rose to 51.4 in July, from the previous figure of 50.9. Composite PMI rose to 51.8 in July, from the previous figure of 51.5.

The dollar has rallied from 23rd to 24th Aug helped by the highest level of New Home Sales figure since Oct 2007. On the 4 hourly chart, the dollar index future (DXY) broke the upside major downtrend line resistance at 94.53 on 24th Aug by a long bullish candle. It has been testing the next major resistance level at 94.73 since then.

Keep an eye on the upcoming US economic figures. With positive readings, DXY will likely break the resistance at 94.73. The next resistance level is at 95.00. While lower-than-expected figures, will likely pull the price back and test the downside support line at 94.60 followed by 94.50.

Also keep an eye on German IFO Business Climate Index (Aug), German Current Assessment (Aug), and German Business Expectations (Aug) to be released at 08:00 GMT today. The figures will affect the strength of Euro and the DAX index.

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