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USD Price May Fall Further, Hit by Negative News Flow

USD Price May Fall Further, Hit by Negative News Flow

Martin Essex, MSTA,

USD price, news and analysis:

  • The tech stocks selloff, weak US housing data, lower US Treasury yields, US/China trade concerns and a reassessment of the US interest rate outlook are all combining to dent USD sentiment.
  • After a seven-session downturn and a reduction in safe-haven flows into USD, further losses seem likely before the currency stabilizes.

Downward pressure on USD price may persist

The USD price, as measured by the DXY Dollar index, could suffer further as a long list of negative factors continues to dent sentiment in the currency, suggesting that the downtrend that began a week ago could extend further before the greenback stabilizes.

USD Index Price Chart, Daily Timeframe (July 22 – November 20, 2018)

Latest USD Index price chart.

Chart by IG

Data for November released Monday by the US National Association of Home Builders showed a sharp fall in its housing-market index that measures builders’ confidence to 60 from 68 – well below the 67 predicted by analysts. That was the lowest reading since August 2016, although any figure above 50 still suggests expansion.

Partly in response, the yield on the 10-year US Treasury note has fallen to its lowest level since September 28 and that has reduced the attraction of the US sovereign bond market. Moreover, there is now talk in the markets that after the Federal Reserve increases the Fed funds rate in December – as widely expected – it may only raise it again twice rather than three times next year.

In addition, the selloff in US tech stocks has weakened the attraction of US stocks more generally too, with sentiment further undermined by the arrest of Nissan Motor Chairman Carlos Ghosn on allegations of the personal use of company money and under-reporting of his earnings.

Elsewhere the US/China trade war seems to be worsening ahead of a G20 Summit in Argentina that begins on November 30, reducing safe-haven flows into the USD.

From a technical perspective, a drop to the November 7 low at 95.16 now seems possible, with the US Dollar Index now in a well-defined downtrend.

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--- Written by Martin Essex, Analyst and Editor

Feel free to contact me via the comments section below, via email at martin.essex@ig.com or on Twitter @MartinSEssex

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

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