The Dollar extends recent rally in Asian session in response to last week's balanced comments from Fed chair Yellen. Even though some analysts noted that Yellen's speech was still dovish overall, her messages were inline with the FOMC minutes released earlier last week that Fed is on track to raise interest rates next year. On the other hand, that was a sharp contrast to ECB president Draghi's message that ECB was ready for further actions as inflation expectations slide. Technically, the EUR/USD breaches 1.32 handle today as recent rally extends and is heading back to 1.3 psychological level. The USD/CHF also took out an important resistance level at 0.9156 which carries medium term bullish implications. The USD/JPY broke and important resistance at 104.24 remains cautiously bullish for a test of 105.41 high. Nonetheless, the greenback is stuck in range against commodity currencies.
Fed Chair Janet Yellen delivered a balanced speech regarding the US labor market and monetary policy in the Jackson Hole symposium. She acknowledged that recent labor market data have performed better than the Fed's forecasts and discussed the cyclical and structural factors contributing to the current employment situation. Yellen judged that cyclical factors remained prominent as significant underutilization remains. Therefore, policymakers should stay patient to the gradual move toward the exit. Overall, the comments have not changed the dovish stance of the Fed and have not done much to alter the central bank's monetary policy outlook.
the Dollar Index reached as high as 82.57 so far today as the really from 78.90 extends. Momentum remains strong as seen in daily MACD. But such momentum might start to slow down in the latter part of this week as daily RSI is now staying in overbought region for sometime. Nonetheless, outlook will remain bullish as long as 81.71 support holds. Current rise is expected to continue to 161.8% projection of 78.90 to 81.02 from 79.74 at 83.20. We'd start to look for topping signal as it approaches 84.75 high.
German Ifo will be the main focus in European session today. The Ifo business claim is expected to drop slightly to 107.1 in August. Current assessment gauge and expectations gauge are both expected to deteriorate to 112.0 and 102.1 respectively. Geopolitical tensions, in particular in Ukraine, is expected to drag further on investor's sentiments. And there are rooms for downside surprise in today's data. From US, new home sales is expected to rise to 426k annualized rate in July.
Looking ahead, the economic calendar isn't very heavy this week. Dollar traders will look at durable goods orders, consumer confidence, GDP revision and jobless claims for reasons to push it higher. Meanwhile, Euro could be vulnerable to downside surprises on CPI data to be release on Friday.
- Tuesday: New Zealand trade balance; US durable goods orders, house price indices, consumer confidence
- Wednesday: Swiss UBS consumption indicator; German Gfk consumer sentiment
- Thursday: German CPI, unemployment, Eurozone M3; Swiss employment; US GDP, jobless claims, pending home sales
- Friday: Japan CPI, unemployment, industrial production, retail sales, housing starts; Swiss KOF; German retail sales, Eurozone CPI, unemployment; Canada GDP, IPPI and RMPI; US personal spending and income, Chicago PMI