Dollar resumes slide on weak data, cautious Fed

29 April, 2016

After the Federal Reserve kept US interest rates unchanged as expected on Wednesday and reiterated its consistently cautious stance with regard to future rate increases, annualized Advance GDP data for Q1 came out on Thursday morning that disappointed already-low prior estimates. In the first quarter of the year, the US economy was estimated to have grown by only an annualized 0.5% against prior expectations of 0.7% growth.

Although this is only the first of three GDP reports, and there may well be revisions, the low Advance GDP estimate on Thursday underscores the Fed’s concerns about significantly slowing economic growth that has helped to deter further rate hikes since December. This report also exacerbates other weaker-than-expected economic numbers that were released earlier in the month, including key inflation price indices, retail sales, manufacturing, durable goods orders, and consumer confidence. Outside of a relatively strong US labor market, these indications of softness in the economy have helped contribute to sustained dovishness from the Fed and are weighing heavily on the US dollar.

For the USD/CHF currency pair, this pressure on the dollar has resulted in an extended retreat from major resistance. At the start of the current trading week, the retreat began at a critical level for USD/CHF, turning the currency pair down right around the key 0.9785 resistance area, which is also around the 50% retracement level of the last major bearish run from March’s high to April’s low. That price level has served as a major support and resistance area since late 2015. From a slightly longer-term technical perspective, USD/CHF has been in a general decline since December, printing consistently lower highs and lower lows as the dollar has suffered from an increasingly dovish Fed after December due to continued weakness in economic conditions and inflation.

As noted, despite other areas of economic weakness, the labor market continues to show strength as a bright spot in the US economy. On Thursday, weekly unemployment claims come in generally as expected at 257,000, which is near 40+ year lows. Next week, the potentially critical Non-Farm Payrolls employment data for April will be released. Although its effect may be muted given the softness in other areas of the economy, it could still provide some surprises that could move the dollar significantly.

With continued bearish momentum on the current USD/CHF retreat, the next major downside target is at the 0.9500 support area, which is the level of April’s lows. In the event of a further breakdown below 0.9500, a continuation of the medium-term downtrend will have been confirmed, with a further downside target around the 0.9250 support area.


Source link  
Signs point to strong labor market

The US jobs report for January is set to be released on Friday morning, just two days after the Federal Open Market Committee (FOMC) announced its decision...

Trump Inauguration Market Outlook

Friday, January 20, 2017 will mark the historic inauguration of what promises to be a highly unconventional US...

Will the Trump Rally extend beyond inauguration?

As the world continues to watch US President-Elect Donald Trump prepare for his January 20th inauguration, key financial markets....


Crude surges as non-OPEC producers agree oil output cut

Crude oil prices surged a huge $3 dollars or 5% higher at the Asian open with Brent briefly trading north of $57 and WTI above $54 a barrel before pulling back slightly...

Could oil end its 5-day losing run?

There are tentative signs that crude oil prices could bounce back today after falling for 5 consecutive and 9 in the past 11 days. As well as oil prices being oversold, bearish speculators may reduce their exposures ahead of the weekend...

Crude oil outlook worsens as US inventories soar

The bad news for crude oil began recently after doubts started emerging with regard to a proposed OPEC deal to cut oil production. Partly as a result of these doubts, crude oil prices for the past two weeks have virtually been in a state of free fall...


Market jitters abound ahead of Fed, Election

Key financial markets, most notably with respect to equities and the US dollar, have felt increasing pressure and heightened volatility in recent days as several primary risk events draw ever closer...

US Presidential Election: Final Debate Aftermath

With the dust having settled after Wednesday final US presidential debate of the 2016 campaign between Donald Trump and Hillary Clinton, the results have become rather apparent...

US Presidential Election: Potential Market Impacts

As of this writing, the current analysis of the electoral college map is predicting around 273 votes for Clinton against 186 for Trump, with 270 votes required to win the presidency...

  


Share: