Today’s Spotlight Market
The US Dollar Index started the month of August on a positive note, posting a very modest gain yesterday. This, however, comes after a rough end to the month of July, where the Dollar Index fell sharply after last Wednesday?s FOMC rate decision. Traders may have been hoping for a much more positive statement regarding the health of the US economy and, in turn, a more hawkish statement from the Fed. However, this did not happen, which has many currency traders concerned that the Fed may be done raising rates over the next several meetings.
Fundamentals
Federal Reserve Bank of Dallas President Robert Kaplan called for ?structural reforms and other fiscal policy? to help jump-start the U.S. economy, which he believes would give the Fed more leeway in raising interest rates on the future. Kaplan also noted that a rate hike in September was still on the table, but it certainly doesn?t appear that traders were buying what he was selling. Last week?s GDP figures were also disappointing, which led to some of the weakness in the greenback. The US economy only grew at 1.2% in Q2, well short of the consensus estimate of 2.6%. Kaplan?s Q&A session seemed contradictory at times. On one hand he noted that a rate increase is not off the table, but also noted that the Fed would remain cautious about raising rates when growth was this sluggish. This week, traders will have plenty of job data to digest with ADP Employment Change, Challenger Job Cuts and Non-Farm Payrolls being released on Wednesday, Thursday and Friday, respectively. This is in addition to the usual Thursday claim data. Other economic reports to watch are Factory Orders on Thursday and, to a lesser extent, Trade Balance on Friday. A strong showing in job data could spark a rebound in the Dollar Index, but negative figures could have a more meaningful impact and present significant downside risk for the US Dollar.
Technical Notes? -? View Today’s Chart
Turning to the chart, we see the cash US Dollar Index (DXY) breaking through near-term support around the 96.40 level. The index has flirted with the 100-day moving average on the downside and a close below the average could be seen as a setback. The recent closes below the 20-day moving average suggest that a near-term high may be in place. The RSI indicator is now at oversold levels, which may be seen as slightly supportive in the near-term.
—————————————————————————————
optionsXpress, Inc. makes no recommendations on investments and does not provide financial, tax or legal advice. Content and tools are provided for educational and informational purposes only. Online trading has inherent risks due to system response and access times may vary due to market conditions, system performance and other factors. An investor should understand these and additional risks before trading. Options and Futures involve substantial risk and are not suitable for all investors.