USD Daily Updates

04 January 2018

After bouncing back yesterday, the US dollar is weakening this morning. Yesterday, the dollar strengthened after looking technically oversold. It was also helped by the release of December FOMC minutes. With regards to the minutes, "most" voting members supported gradual rate hikes while "several" expressed fears of low inflation and financial stability risks. The dollar strengthened after the minutes were released as markets priced in a greater chance of a March rate hike. In other news, ISM manufacturing PMIs were stronger-than-expected, suggesting that US economic growth remains in an upswing. The dollar is currently selling off against most major currencies except the Japanese yen. Our short-term and medium-term trending indicators remain bearish.  

USD/JPY is mostly flat today and currently trading above 112.50. EUR/USD is up and is trading above 1.2030. The pound is higher, and GBP/USD is currently above 1.3520. 

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. ISM manufacturing PMIs beat expectations (59.7 vs. 58.1 expected). FOMC minutes suggested that most voting members support gradual rate hikes. Later today, we'll get ADP employment data, composite Markit PMIs 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%). 

Updated 
Short term outlook
Bearish

As the dollar weakens thanks to strong GDP growth outside the US, we are downgrading the dollar to bearish. Note that the currency is trading within a normal range 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. 

Medium term outlook
Bearish

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. 

Updated