News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
EUR/USD
Bearish
Oil - US Crude
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Wall Street
Mixed
Gold
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
GBP/USD
Bearish
USD/JPY
Bullish
More View more
Real Time News
  • 🇲🇽 Economic Activity YoY (JUL) Actual: -9.8% Expected: -10% Previous: -13.3% https://www.dailyfx.com/economic-calendar#2020-09-25
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 96.79%, while traders in EUR/GBP are at opposite extremes with 65.81%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/pPMQB3Sgtf
  • Heads Up:🇲🇽 Economic Activity YoY (JUL) due at 11:00 GMT (15min) Expected: -10% Previous: -13.2% https://www.dailyfx.com/economic-calendar#2020-09-25
  • Norges Bank - total liquidity has been unevenly distributed between banks, leading to considerable uncertainty over supply of NOK. Adds that they will offer fully allotted F-Loans at fixed rates with 1 day maturities
  • London put on national Covid watch list amid recent surge in cases
  • Commodities Update: As of 10:00, these are your best and worst performers based on the London trading schedule: Oil - US Crude: -0.29% Gold: -0.42% Silver: -1.13% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/OTTxCl6GJR
  • Spanish health minister says the government recommends a total lockdown in Madrid
  • Forex Update: As of 10:00, these are your best and worst performers based on the London trading schedule: 🇳🇿NZD: 0.18% 🇦🇺AUD: 0.02% 🇯🇵JPY: -0.05% 🇨🇭CHF: -0.11% 🇪🇺EUR: -0.22% 🇬🇧GBP: -0.25% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/37yFAZ530P
  • There is a great debate about which type of analysis is better for a trader. Is it better to be a fundamental trader or a technical trader? Find out here:https://t.co/7kPzAoNoLG https://t.co/Fa4sDLIjww
  • 🇫🇷 Unemployment Benefit Claims (AUG) Actual: -171K Previous: -172.2K https://www.dailyfx.com/economic-calendar#2020-09-25
DXY Looking for a Lifeline as it Nears Crucial Support

DXY Looking for a Lifeline as it Nears Crucial Support

2017-03-28 11:47:00
Christopher Vecchio, CFA, Senior Strategist
Share:

Talking Points:

- Gap between 'hard' and 'soft' US economic data proving to be a burden for US Dollar, US equity markets.

- With Gold and EUR/USD at resistance, the greenback needs to make a stand before momentum carries it away.

- Over two-thirds of traders are net-short EUR/USD, while 72% are net-long USD/JPY; neither positioning bodes well for the greenback in the short-term.

The end of the month is typically a quieter time for the economic calendar, although today is probably the busiest day of this week for the US Dollar with the US Advanced Goods Trade Balance figures and US Consumer Confidence due out. Market participants will have a close-up look at the divide between 'hard' and 'soft' economic data, and whether or not that dissonance persists.

'Hard' data refers to figures that reflect actual economic activity, like retail sales or the trade balance, while 'soft' data refers to sentiment surveys, like consumer confidence. As the figure below shows, the gap between hard data and soft data in the United States has been quite prevalent, especially since over the past month (chart 1).

Chart 1: Nomura Hard vs Soft Data Indices (September 2016 to March 2017)

DXY Looking for a Lifeline as it Nears Crucial Support

These figures are interesting because they underpin the dramatic differences in GDP forecasts for Q1'17 for the United States between two prominent forecasting models, the Atlanta Fed's GDPNow and the NY Fed's Nowcasting Report. The former is calling for a Q1'17 GDP reading of +1.0%, while the latter stands at +3.0%. While both are dynamic factor models (which measure the co-movement of multiple time series at once), they are built very differently: the Atlanta Fed's only uses hard data in an effort to immitate how the Bureau of Economic Analysis computes GDP; while New York's uses both hard and soft data, as a way to try and incorporate how sentiment plays a role in shaping future economic activity.

Why does this matter? For the US Dollar, there is a rather underwhelming feeling coursing its way through the market right now: US economic activity isn't strong enough to justify three rate hikes in 2017; and the lack of a coordinated fiscal policy rollout from the Trump administration will prevent the expected boom in US economic activity from being realized. The diminished prospect for fiscal stimulus means inflationary pressures won't rise to the degree previously thought, so the Fed won't be inclined to hike more than what's priced into markets already.

The US Dollar needs a lifeline right now before momentum carries it away. With EUR/USD and Gold near key resistance, and the DXY Index nearing support over the past 11-months, the best thing for the greenback would be for the gap between hard and soft data to close to the upside. That is, for reality to catch up to the high expectations that have proliferated in recent weeks.

Otherwise, if the gap between reality and expectations persist, there are key worries out of the US to worry about in the month of April, mainly whether or not the US Treasury runs through its extraordinary measures by April 28, which could prompt a government shutdown. After last week's legislative stumble with respect to healthcare, markets - the US Dollar, US equities, and US yields - won't be thrilled if the prospect of another US debt downgrade a la August 2011 becomes a possibility.

Read more: FX Markets Turn to US Fiscal Outlook, Brexit Being Triggered, Chinese PMI

--- Written by Christopher Vecchio, Senior Currency Strategist

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

To be added to Christopher’s e-mail distribution list, please fill out this form

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

DISCLOSURES