After weakening sharply yesterday, the US dollar is taking a breather this morning. The buck is mostly flat against major global peers including the euro and the Japanese yen. Yesterday, the currency began the day on a weak note and then continued selling off following strong Eurozone manufacturing PMIs. In a broader commentary, we explained that EUR/USD can keep climbing given ongoing strength in the region's economy. Looking at US government bonds, rising bond yields are providing some much-needed support for the currency. 10-year government bond yields rose to 2.462% yesterday. Upcoming data releases including FOMC minutes should provide further cues. Our short-term and medium-term trending indicators remain bearish.
USD/JPY is mostly flat today and currently trading above 112.20. EUR/USD is flat and is trading above 1.2050. The pound is higher, and GBP/USD is currently above 1.36.
Looking at economic data this week, there are a fair number of employment-related data releases. Markit manufacturing PMIs soared to 55.1 vs. 53.9 previously. Later today, we'll get ISM prices paid and manufacturing PMIs. We'll also see FOMC minutes from the previous meeting. On Thursday, we'll get ADP employment data, composite Markit and initial jobless claims. Friday is the key day, and we'll see non-farm payrolls as well as other employment related data. We'll also see the trade balance and ISM non-manufacturing PMIs. Before the holidays, November Core PCE figures met expectations (1.5%).
As the dollar weakens thanks to strong GDP growth outside the US, we are downgrading the 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.
Following the holiday season sell-off, 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.