The US dollar is at fresh three-year lows today. The currency began selling off yesterday after strong Eurozone consumer confidence caused the euro to surge. The yen also strengthened yesterday following the latest Bank of Japan statement and press conference. While the yen was flat when we wrote our Japanese yen daily update yesterday, the currency strengthened later in the day. As the euro and the yen (two of the US dollar's most important peers) strengthened, the currency weakened in relative terms. In other news, the dollar also weakened after President Trump publicly remarked that NAFTA discussions were going well. The Canadian dollar and the Mexican peso strengthened against the dollar immediately following the announcement. As Canada and Mexico are significant US trading partners, a continuation of NAFTA should keep dollar strength at bay. Our short-term and medium-term outlook on the dollar remains bearish.
USD/JPY is down today and currently trading above 110.0. EUR/USD is up and is trading above 1.230. The pound is flat, and GBP/USD is currently above 1.40.
Looking at economic data this week, markets will be watching PMIs and Q4 GDP figures. The Chicago Fed National Activity Index was lower than expectations (0.27 vs. 0.44 expected). Later today, we'll see the housing price index and Markit PMIs (manufacturing, services and composite). On Thursday, we'll see initial jobless claims and new home sales. Finally on Friday, we'll get Q4 GDP and durable goods orders. Last week, industrial production figures exceeded consensus estimates by a large margin.
Thanks to recent dollar weakness, we are downgrading the US dollar to bearish. Note that the currency is looking oversold. This is based on technical indicators when looking at a weekly chart.