Dollar Holds Firm, FOMC Minutes Eyed
XM Group | Aug 19, 2014 03:58AM ET
The US dollar held onto gains made after being boosted yesterday by upbeat US housing data. Rising US Treasury yields helped buoy the dollar after the NAHB Housing Market index rose more-than-expected to reach a 7-month high in August.
The dollar extended gains versus the yen today to reach a high of 102.64, having maintained a rally from a low of 101.50 hit on August 8.
The main driver of the dollar will be the FOMC minutes from the Federal Reserve’s July policy meeting which are due on Wednesday, while the highlight of the week will be Fed Chair Janet Yellen’s keynote speech at the Jackson Hole central banking summit on Friday.
Later today attention will be on US consumer inflation data. Inflation data are important for the Fed in determining when to raise interest rates.
In other news, the Reserve Bank of Australia released the minutes of the latest policy meeting. Despite the dovish tone there were few surprises and the Australian dollar was barely affected. The aussie rose against the greenback to hit a high of 0.9341, the strongest in almost 2 weeks.
The euro held close to a 9-month low of 1.3332 as disappointing fundamentals surround the single currency and weakness in the Eurozone economic recovery is adding pressure to the downside. Thursday’s PMI data will be important to watch. Meanwhile any developments regarding the Ukraine crisis will also have an effect on the euro.
In terms of economic data today, UK inflation data for July are due and are forecasted to show a softer number from the previous month and well below the Bank of England’s inflation target of 2%.
The pound remains steady ahead of the CPI data, holding onto gains made yesterday after rallying on comments from Bank of England Governor Market Carney over the weekend that signaled interest rates could rise this year. Sterling traded between 1.6713 and 1.6727.h3
GBP/USD: Downside Risk/h3
The downtrend from mid-July remains intact and the GBP/USD appears to remain under pressure while it trades below the daily Ichimoku cloud and the downtrend line.
Technical indicators show downside risk – tenkan-sen and kijun-sen are negatively aligned, RSI is in bearish territory and MACD is negative. The market is below the 10-day moving average but is supported by the 200-day moving average, suggesting there might be a temporary pause in the decline of prices.
Near-term support is seen at 1.6656, at the August 14 low and the 200-day moving average, while resistance is at the August 13 high of 1.6837. A break below 1.6656 will open the way towards the March 24 low of 1.6464.
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