While the US dollar started the day on a very weak foot, the currency is currently rebounding. Looking at USD against its major peers, it is currently strengthening against the euro, the British pound and the Japanese yen. US government bond yields are strengthening today, giving the currency a boost. Looking at a daily chart, the US dollar continues to languish in oversold territory, and looks due for a short-term rally. As we have written in the past, the longer-term prospects for the buck remain weak thanks to strong global growth outside the US. Our short-term and medium-term outlook on the dollar remains bearish.
USD/JPY is up today and currently trading above 110.80. EUR/USD is down and is trading above 1.2210. The pound is down, and GBP/USD is currently above 1.3760.
Looking at economic data this week, markets will be watching industrial production and housing-related data. On Wednesday, we'll see industrial production and capacity utilization. We'll also see the NAHB housing market index. On Thursday we'll see housing data including housing starts and building permits. We'll also get initial jobless claims and the Philly Fed survey. Last week, core CPI was slightly ahead of expectations.
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.