After strengthening yesterday, the US dollar is once again selling off. Looking at the buck against its major global peers, it is weakening against the euro, the British pound and the yen. While rising US bond yields supported the currency yesterday, today the currency is weakening in spite of rising yields. Looking at recent economic data, both industrial production and capacity utilization figures were ahead of estimates. Industrial production, a leading indicator for future growth, was particularly strong and suggests that GDP growth is set to continue growing. Despite strong US economic data, the dollar remains very weak thanks to optimism for growth outside the US. Our short-term and medium-term outlook on the dollar remains bearish.
USD/JPY is down today and currently trading above 110.90. EUR/USD is up and is trading above 1.2240. The pound is up, and GBP/USD is currently above 1.3890.
Looking at economic data this week, markets will be watching industrial production and housing-related data. Industrial production (0.9% vs. 0.4% expected) and capacity utilization (77.9% vs. 77.3% expected) both beat estimates. The NAHB housing market index (72) met expectations. Tomorrow, 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.
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.