Dollar Recovery Lost Momentum After FOMC Minutes
ActionForex | May 21, 2015 04:25AM ET
Dollar's recovery lost some momentum after dovish FOMC minutes but remains in tight range in Asian session. The minutes for April meeting noted that many policy makers "thought it unlikely that the data available in June would provide sufficient confirmation that the conditions for raising the target range for the federal funds rate had been satisfied. This basically confirmed markets' expectations. While "severe winter weather in some regions had reportedly weighed on economic activity" in Q1, Fed remained confident that "economic growth would return to a moderate pace over the rest of this year." DJIA dropped slightly by -27 pts, or -0.15% to close at 18285.4 while S&P 500 dropped -1.98 pts, -0.09% to close at 2125.85. Both were close to record highs.
Dollar index's strong rebound this week raised the chance that pull back from 100.39 has completed at 93.13, ahead of 38.2% retracement of 78.9 to 100.39 at 92.18. Nonetheless, we'd prefer to see a decisive break of 55 days EMA (now at 95.74) and 96.17 support turned resistance to confirm. In that case, stronger rebound should be seen back to retest 100.39 high. Meanwhile, break of 93.13 will extend the correction with another falling leg.
Released from China, HSBC manufacturing PMI rose to 49.1 in May, but missed expectation of 49.4. That's also the third straight month of sub-50 contractionary reading. Looking at the details, the new exports orders component dropped to 23 month low of 46.8. Output component contracted for the first time this year to 13 month low of 48.4. Also, employment component showed contractions for the 19th month in a row. A Markit analyst noted that "softer client demand, both at home and abroad, along with further job cuts indicate that the sector may find it difficult to expand, at least in the near-term, as companies tempered production plans in line with weaker demand conditions." Also released in Asia, Japan manufacturing PMI rose to 50.9 in May versus expectation of 50.3. Australia consumer confidence rose 3.6% in May.
Looking ahead, Eurozone PMIs will be the main focus in European session. UK retail sales will also be watched. Later in the day, US will release jobless claims, Philly Fed survey and existing home sales.
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