US Dollar Index Shows Modest Gains despite Returning Risk Appetite
The greenback was mixed against the majors today as a host of economic releases and central bank minutes shifted sentiment throughout the global trading day. The Dow Jones FXCM US Dollar Index started the day off weaker as it looked to test the lower bound trendline of the ascending channel dating back to April 28th. The greenback pared losses into the US open where it remained range bound for much of the session.
The channel formation remains intact noting interim support at 9610, backed closely by the 23.6% Fibonacci retracement taken from the November 30th decline at 9590. A break below this level sees subsequent floors at 9520 and 9460. Topside targets are eyed at the 50-day moving average at 9675, followed by the 38.2% Fibonacci retracement at 9728 and 9815.
A glance at the relative performance in the component currencies sees the pound sliding more than 0.5% on the back of weaker than expected employment data and a dovish tone to the BoE minutes. The yen remained on the defensive as increased risk appetite saw traders unwinding haven flows. Yesterday the yen was the weakest performer against the dollar on comments made by BoJ Governor Masaaki Shirakawa who warned that the domestic economy remained in a “severe” state. The aussie and the euro saw temped gains as a lack of news regarding the possibility of a “soft” restructuring saw nerves ease. The release of the April FOMC minute initially saw the greenback come off, but losses were quickly pared as the dollar continued its ascent.
Tomorrow’s economic diary sees weekly jobless claims and existing home sales data out of the US. Claims are expected to show slight improvement with a print of 420K from the previous read of 434K. Traders will be closely eying existing home sales after a dismal report earlier in the week on April housing starts. Sales are expected to print at 2.0%, down from a gain of 3.7% a month earlier. Data for the week rounds off with the April leading indicators and the Philadelphia Fed survey at 10AM ET, with consensus estimates calling for a print of 20.0, up from a previous read of 18.5. April leading indicators are seen lower at 0.1%, down from the March print of 0.4%. Look for dollar strength to persist as the euro struggles to set aside sovereign debt concerns and fears over the state of one of the world’s largest exporters keep the Japanese yen subdued.
Written by Michael Boutros, Currency Analyst for DailyFX.com
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