The dollar ended the day down yesterday and is enjoying a small rebound today. US markets are closed for Thanksgiving and yesterday was also a national holiday in Japan. As such, trading volumes have been fairly light. In general, the dollar has been selling off following this week's FOMC minutes. As Federal Reserve Board members begin to doubt the trajectory of inflation, hopes for rate hikes in 2018 are falling as a result. The upcoming Senate tax vote next week is another dollar headwind. Despite the ongoing rally in crude oil prices, inflation expectations continue to fall. Our outlook on the dollar remains bearish.
USD/JPY is up and currently trading just above 111.50. EUR/USD is flat today and currently just above 1.1840. The pound is down today, with GBP/USD currently above 1.3280.
This week, we’ll see economic data including existing home sales, durable goods, as well as Markit PMIs. Existing home sales beat forecasts (5.48m vs. 5.42m expected) while the Chicago Fed National Activity Index was higher the previous print (0.65). Initial jobless claims (239k vs. 240k expected) and durable goods (-1.2% vs. 0.3% expected) both missed expectations. Consumer sentiment (98.5 vs 98 expected) was above average estimates. FOMC minutes suggested a tougher outlook for future inflation. Finally, on Friday we’ll get Markit PMIs. Last week CPI met estimates while Core CPI beat estimates.
As the dollar falls on a weaker inflation outlook, we are downgrading the US dollar to bearish. Note that the currency is looking oversold in the short-term time frame. Our analysis is based on various technical indicators when looking at a daily chart of the US dollar index.
As the dollar falls on tax-related disappointment, we are downgrading the US dollar to bearish. The currency is neither overbought nor oversold today, and trades within a normal range. This is based on technical indicators when looking at a weekly chart.