It was a strangely quiet end to the week for the US dollar and the dollar index, and despite GDP coming in with a negative 0.7%, and reversing the 0.2% growth figure of last quarter, this was marginally better than expected with the forecast having been a fall to -0.8%. This was one of those cases where markets absorbed the news as a bad news story, but not quite as bad as expected. In other words, a good news story, with the US dollar hanging on, and closing marginally lower on the daily chart, but ending with very positive gains for the week. Indeed it was the Canadian dollar which reported at the same time that was duly punished for a poor number.
The recent speech from Fed chair Janet Yellen provided the catalyst for a reversal in the USD’s bearish sentiment of April and early May, and which duly provided the springboard for a breach of the resistance in the 11,880 region, thereby creating the platform for last week’s solid gains with the index closing just below the 12,000 area at 11,987.56. This coming week’s economic data centres on Non Manufacturing ISM data, the Trade Balance and finally on Friday the unemployment data with the monthly NFP release with a current forecast of 226K against a previous of 223K.
Whilst the daily chart confirms the bullish sentiment, this is also reflected on the weekly chart, with the bullish engulfing candle of two weeks ago reversing the downwards trend, with last week’s candle adding further upside momentum for the dollar. With the platform of support now in place below in the 11,875 region, this should provide continued technical support for a move back to test the highs of March and April in the 12,150 region in due course. Much will also depend on the fundamental news over the next few weeks with Friday’s NFP data providing a sharp reminder of the fickle and delicate path now being trod by the US dollar.