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US Consumer Spending Misses Expectations- Dollar Heavy

US Consumer Spending Misses Expectations- Dollar Heavy

2011-05-27 14:06:00
Michael Boutros, Technical Strategist
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US_Consumer_Spending_Misses_Expectations-_Dollar_Heavy_body_Picture_2.png, US Consumer Spending Misses Expectations- Dollar Heavy

Personal Income m/m

US_Consumer_Spending_Misses_Expectations-_Dollar_Heavy_body_Picture_3.png, US Consumer Spending Misses Expectations- Dollar Heavy

Personal Spending m/m

According to today’s report from the Commerce Department, US personal income increased $46.1B or 0.4% in April. The print was largely in line with market expectations and comes off a previous gain of 0.5% in March. Despite the gains in income, consumer spending missed consensus estimates with a print of 0.4%, down from a read of 0.6% in March. The data suggests that higher gasoline prices and overall advances in consumer goods continue to weigh on household budgets as inflation continues to accelerate. Weaker consumer spending, which accounts for nearly 70% of US economic activity, falls in line with expectations for a slowdown in GDP growth for the second half of 2011.

The core PCE index increased by 1.0% y/y, posting its largest gain since September, while the month on month figure printed at 0.2% up from a 0.1% m/m read in March. Disposable incomes adjusted for inflation posted a flat read, with savings falling to their lowest levels since August of 2009 with print of $570.6B.

US_Consumer_Spending_Misses_Expectations-_Dollar_Heavy_body_Picture_4.png, US Consumer Spending Misses Expectations- Dollar Heavy

A knee-jerk reaction to the data saw the greenback accelerate overnight losses before quickly pulling back to pre-announcement levels. The Euro saw a brief test of the 1.43-handle, marking a 1 week high after falling below the 1.40-figure earlier in the week. The Dow Jones FXCM US dollar index continues to hold at key support at the convergence of the 20-Day moving average and the 23.6% Fibonacci extension taken from the November decline at 9590. Although a break of this level is not expected, we note subsequent floors at 9520 and 9450. Topside resistance is now seen at the 50-Day moving average currently at 9645, and the 38.2% Fib extension tested earlier in the week at 9730.

US_Consumer_Spending_Misses_Expectations-_Dollar_Heavy_body_Picture_5.png, US Consumer Spending Misses Expectations- Dollar Heavy

Dow Jones FXCM US Dollar Index at key support

Written by Michael Boutros, Currency Analyst for DailyFX.com

To contact the author of this report, please send inquiries to:mboutros@dailyfx.com

You can also follow Michael on Twitter@MBForex

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

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