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Dollar Consolidation Continues

Published 03/23/2015, 05:14 AM
Updated 03/09/2019, 08:30 AM
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The dollar is mildly softer as the week starts and markets are readjusting the expectation of the timing of the Fed's rate hike after last week's dovish FOMC statement. Asian equities are generally higher following Friday's rally in US stocks. Nikkei 225 is up 1% at 19755 and is heading toward 20000 handle. Gold recovered last week and is firm above 1180 handle for the moment but lacks follow through buying for 1200. Crude oil is also staying firm above 45 after last week's recovery. Dollar index is trading around 97.80 for the moment as the consolidation from 100.42 short term to extends. Overall development favors more consolidation in the greenback in a bit of soft tone.

Regarding our strategies, our EUR/USD short was stopped out at 1.0700 at profit last week. AUD/USD short was stopped at 0.7700 at a small profit. Meanwhile, USD/CAD long was stopped out at 1.2600 at a small loss. Overall, the outlook in the forex markets is a bit mixed for the moment. It should be noted that while dollar and yen retreated last week, there was no confirmation of trend reversal. In particular, near-term outlooks in EUR/USD, GBP/USD, EUR/JPY and GBP/JPY are staying bearish. AUD/USD and USD/CAD are having risk of double bottom and double top reversal. At this point, we won't change our bullish view on dollar. But we'd stay away from trading for a week to see how the markets develop first.

For the week ahead, the US would release its inflation report Tuesday with headline CPI expected to have contracted -0.1% y/y in February. Core CPI probably accelerated to 1.7% from 1.6% in January. The flash Markit manufacturing PMI and February's new home sales would also be due that day. These would be followed by the February durable goods orders report on Wednesday and jobless claims report and flash Markit services PMI on Thursday. 4Q14 GDP would probably be revised higher to 2.4% from 2.2% estimated previously, as shown Friday.

In Europe, Eurozone's flash manufacturing and services PMIs for March would be due Tuesday whilst the French INSEE survey and German IFO survey would be released the next day. Consumer confidence reports will be released by Germany and France on Thursday and Friday respectively. UK's February CPI/PPI reports on Tuesday might show headline inflation falling to 0.1% y/y.

In Asia, China's flash March HSBC (LONDON:HSBA) manufacturing PMI would be released on Tuesday, followed by the country's consumer sentiment data on Wednesday. We would also get Japan's employment, household spending and inflation data on Friday.

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