The US dollar is mostly flat this morning after selling off yesterday. The currency remains weak against most major peers except the Japanese yen. Despite strong ADP jobs numbers and composite PMIs, the dollar remains weak thanks to strong growth outside the US. While the currency was looking oversold earlier in the week based on technical factors, the buck is currently trading within a normal range. Earlier this week, we explained why the US dollar tends to weaken when global economic growth is accelerating. In short, the abundance of international debt issued in USD (given the dollar's status as the world's reserve currency), keeps the currency in check when global growth is strong. Our short-term and medium-term trending indicators remain bearish.
USD/JPY is up today and currently trading above 113.0. EUR/USD is down slightly and is trading above 1.2050. The pound is slightly higher, and GBP/USD is currently above 1.3560.
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. ADP employment data beat expectations (250k vs. 190k expected). Composite Markit PMIs were stronger than expected (54.1 vs. 53.7 expected), while initial jobless claims were worse than expected (250k vs. 240k expected). Today 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%).
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.