The dollar has been able to regain most of the sell-off after a less hawkish Fed chairwomen Janet Yellen promised low interest rates for a significant period of time. This is not generally positive for the dollar, but it continues to fuel the asset bubbles that help prop up the greenback. Last week’s data was mixed overall, but the low liquidity on Thursday proved beneficial as the dollar erased a fairly deep decline on Philly manufacturing numbers that rose to 16.6, higher than the 9.6 expected by economists. Unemployment claims rose slightly to 304K.
The mixed news does not necessarily show that the US economy is firing on all cylinders because it is not. But, it is supporting the Fed’s tapering of asset purchases, which will lead to more dollar gains near-term. It is uncertain whether or not the low – next to zero low – interest rates will cause the next financial calamity and if the dollar can remain somewhat unscathed.
Price action has seen support near 70.70 with 79.90/95 as resistance on the 4H chart. Spikes through 79.95 have tested this level, but price action has not been able to close higher. Last week was able to close above the 38.2 percent Fibonacci retracement level from the monthly high, but the dollar still seems to be in a period of consolidation.
A break above 79.95 will lead the dollar to trend higher to the 50 percent retracement level at 80.07.
Next week will hold a series of dollar-important data with existing and new home sales during the middle of the week. Thursday, core durable goods and unemployment claims with round out the week. HSBC Chinese flash manufacturing index will report early in the week, and this could provide some movement in the greenback. Analysts are expecting a .4 percent rise to 48.4; but, a disappointment could fuel a risk-off sentiment, and the dollar could see downside to 79.80 before retesting 79.70.