USD Daily Updates

31 January 2018

The US dollar is weaker today. Looking at the currency against its major peers, the dollar is selling off against the euro, the British pound and the Japanese yen. Looking at technical indicators, the dollar continues to look oversold on a daily and a weekly chart. Recent economic data points to strong future growth. Yesterday, housing data showed that US house prices are growing at 6.4% year-over-year, while consumer confidence rebounded in January. Looking at recent news, President Trump's State of the Union Address had a limited impact on foreign exchange markets. Trump called for a $1.5 trillion dollar infrastructure investment program while promising to get tough on immigration. Today is an important day for the dollar thanks to the upcoming Federal Reserve meeting. While the Fed is not expected to raise rates at today's meeting, many believe it will signal tighter monetary policy in the future. All in all, the US dollar remains in a bear market thanks to strong global growth. Our short-term and medium-term outlook on the dollar remains bearish.              

USD/JPY is down slightly today and currently trading above 108.60. EUR/USD is up and trading above 1.2430. The pound is up, and GBP/USD is currently above 1.4180. 

Looking at economic data this week, there are quite a few items on the calendar. Most importantly, there is an FOMC meeting this week. Core personal consumption expenditures (1.5% YoY) met expectations. Personal incomes (0.4% MoM) beat expectations while personal spending (0.4% MoM) met expectations. The Dallas Fed’s manufacturing business index (33.4 vs. 14.6 expected) was significantly ahead of expectations. Case-Shiller Home Prices (6.4% YoY) met expectations while consumer confidence (125.4 vs. 123.1 expected) was ahead of estimates. Later today, we’ll see ADP jobs numbers, Chicago PMIs and pending home sales. More importantly, we’ll get a monetary policy statement from the Fed and an interest rate decision. On Thursday, we’ll see initial jobless claims, nonfarm productivity and Markit and ISM manufacturing PMIs. We’ll also see ISM prices paid. Finally on Friday, we’ll get nonfarm payrolls and the unemployment rate. We’ll also see average weekly hours and earnings, as well as factory orders. Last week, Q4 GDP came in below consensus estimates.

Updated 
Short term outlook
Bearish

As the dollar weakens, 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. 

Medium term outlook
Bearish

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. 

Updated