USD surges on positive data

26 April, 2017

USD traders were upbeat today as the US economic data was much stronger than expected despite a minor blip. New home sales m/m stole the show lifting to 621K (583K exp), show casing a strong resurgence in the housing market as confidence has been taking off. However, CB consumer confidence dipped to 120.3 (122.5 exp). This is the first time we have seen a dip since October last year, but we do see the odd everyone now and then and it does not mean that consumer confidence has reached the edge. Traders are certainly back in favour for the US economy and the USD, and it's plain to see that today has been one of the strongest days in sometime. The real question will be if such movements can be sustained and the next batch of US data is not due out till Thursday so we could be some time off seeing further large movements.

One of the biggest movers today was the NZDUSD which plunged down the charts on the back of USD strength. It has been over a month since we've seen such a large move, and traders expectations around the RBNZ lifting rates verse the FED is influencing these bearish movements. With the 50 day moving average recently helping to stop the bulls in their tracks it seems unlikely we will see some strong resurgence unless NZD data picks up. Support has been found around 0.6948, with further levels found at 0.6919 and 0.6887, which could be testing in the coming days if the bears remain strong in looking to push further.

Markets are also focused on oil once again, after the recent failure to crack through the trend line which has been a major feature for some time has lead to a bearish resumption for oil markets. OPEC has been trying to cut for some time and there is a large amount of anticipation that further cuts may be required in the current market in order to see prices surge higher. A higher USD will also weigh heavily on the ability of oil to claw back further ground on the charts, and market expectations are high around this Wednesdays oil reading from the US where the market is expecting to see a small drawdown of -1.66M.

For oil the trend line has been a big killer for momentum, while previously supporting the bulls it has switched and become a very hard prospect for any bulls pushing higher at present. The recent drop on the charts has so far struggled against the 200 day moving average, but resistance at 49.70 is holding back a resurgence for the bulls. If we do see the bears look to continue I would expect a drop to 47.85 with a focus on even pushing lower if a strong USD persists and oil inventories fail to show a strong drawdown. In the event of a bullish break out 51.68 is likely to be a strong target before attempting to tackle the trend line again.

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