2 Days of Impact - US Dollar to Climb Higher
The US Dollar is set for a solid week in terms of movements, and the next two trading days will have a big impact.
US economic news: Rating, Forecast
Core Retail Sales m/m:
High
0.40%
Retail Sales m/m:
High
0.60%
Unemployment Claims:
High
310K
PPI m/m:
High
0.10%
Preliminary Consumer Sentiment:
High
83.00%
With tonight showcasing retail sales data and unemployment claims, it’s likely we will see big movements. Economic forecasts so far point to an improvement over last month, as weather improves and as the US economy has started to pick up pace, while tomorrow will be PPI (the only forecast to be weaker) and consumer sentiment, which many are picking to climb in line with retail sales.
Obviously this data has a big impact, but none more so than on the US Dollar Index (USDX) which looks likely to climb higher on the back of economic data. Unemployment claims certainly have the potential to fall, as US job openings jumped heavily to 4.46 million on Tuesday; a great result for the U.S economy and well ahead of the forecast 4.01m. It also bodes well for retail sales as these are heavily influenced by a growing employment sector.
While the USDX is primarily made up of the Euro (57.6% to be exact), this helps add to the fundamental aspect of further rises, considering that the European Central Bank (ECB) has so far looked to slash rates, and look at exotic measures if need be to help prop up inflation in the Euro-zone. The currency in turn has taken a dive in the recent week, and many are expecting further drops.
So where to for the USDX in terms of technicals.
Well, it's certainly clear that there is some bullish movement, especially after several months of bearish movements lower. There is clearly a lot more ground for the USDX to climb before even starting to consolidate.
Current momentum points to higher highs as the market starts to trend higher. Key resistance levels can be found at 81.839, 82.641 and 83.393, these are likely to be all tested at some point, but the major resistance level will be at 81.839 because in the current market, it has been a tough point for markets to crack. Previous upward movements were met with very heavy resistance at this key level.
In the short term, this looks like an attractive target, and the markets will be looking to test this level to see how much give it has. I would look to take profits at this level if possible, however, it may take a week or two to reach this level.
A breakthrough of this level would be a very strong indicator that it’s a bullish dollar index, and I think a lot of people will be waiting to see if a breakthrough is possible at 81.839. I would expect market participants to aggressively jump in if there was a breakthrough.
In the short term, 81.839 is a key level for traders to watch while in the long term, if there is a breakout, we could expect to see further highs as the bulls take the market by the horns. One thing that is clear though is that the US situation is improving – we are seeing strong employment data and a more positive market as a result. This will certainly add to the value of the dollar index in the long term.