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USD Needs Strong Data Today to Stave Off Pullback

USD Needs Strong Data Today to Stave Off Pullback

Talking Points:

- DXY Index trading within yesterday's range, although heading lower once more.

- EUR/USD and USD/JPY continue to be primarily driven by what's happening with US yields and rate differentials.

- See the DailyFX Economic Calendar for today's data.

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Mondays, 7:30 EDT/12:30 GMT: FX Week Ahead: Strategy for Major Event Risk

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Thursdays, 7:30 EDT/11:00 GMT: Central Bank Weekly

The US Dollar is slipping back this morning, although DXY Index remains within yesterday's range. A lack of confidence due to scant details on policy reform has had traders paring back long greenback and short US Treasury positions this week amid fears of a letdown.

In actuality, however, the best antidote to shoring up confidence over the state of the US economy - and thus the Fed's ability to hike rates two to three times this year - is a series of strong data. Today, we'll get the two most important US data releases of the week, both pertaining to the US consumer.

Consumption is the most important part of the US economy, generating nearly 70% of the headline GDP figure. The best monthly insight we have into consumption trends in the US might arguably be the Advance Retail Sales report. In December, consumption strengthened further, according to a Bloomberg News survey, with the headline Advance Retail Sales set to increase by +0.7% (m/m) for the third consecutive month.

The Retail Sales Control Group, the input used to calculate GDP, is due in at +0.4% from +0.1% (m/m). Higher consumer confidence after the US elections may be translating into looser purse strings for consumers, which will help drive US growth for Q4’16.

Later in the morning, the US of Michigan Confidence guage for December will be released. The confidence index is expected to drift slightly lower to 98.2 as US consumers await President-elect Trump to provide more detail on his tax and spending policies. November’s jump to 98.5, from a prior month’s 92.6, was driven by consumer expectations that Trump would create more jobs (although wage gain expectations were limited).

Speaking after November’s sharp rise, U. of Michigan’s Surveys of Consumers Chief Economist Richard Curtin said that favorable expectations could help jump-start growth before the actual enactment of policy changes, and form higher performance standards that will be used to judge the Trump presidency. As US Treasury yields move, so too will the US Dollar.

See the above video for a technical review of the DXY Index, EUR/USD, GBP/USD, AUD/USD, USD/JPY, Crude Oil, and Gold.

Read more: After Falling on Trump, USD Turns to Fed Speakers for Support

--- Written by Christopher Vecchio, Senior Currency Strategist

To contact Christopher Vecchio, e-mail

Follow him on Twitter at @CVecchioFX

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.