The greenback was weaker for a second consecutive day in North American trade with the Dow Jones FXCM Dollar Index (Ticker: USDollar) off 0.44% on the session. US equities pared a mid-day advance by the close of trade, with the Dow, the S&P 500, and the NASDAQ sliding 0.12%, 0.07%, and 0.43% respectively. Investor sentiment remains subdued ahead of tomorrow’s EU meeting in Brussels where officials will attempt to reach a consensus on a mechanism to curb the threat of debt contagion. Meanwhile the US’ own deficit woes continue to see haven flows diverted from the dollar as mentioned in today’s Winners/Losers report. Accordingly the dollar has continued to slide with the index breaking below major trendline support dating back to late April. The break comes at the convergence of the lower bound channel trendline and the 23.6% Fibonacci retracement taken from the November declines just below the 9600 mark. The move may represent a significant turning point for the greenback, with further losses expected in the days ahead.
An hourly chart suggests the dollar index may be trading within a new descending channel taken from the July 12th peak at 9750. The greenback continues to straddle the 50% Fibonacci retracement taken from the late-April advance at 9550. Interim support rests at 9525 backed b y the 61.8% Fib retracement at 9500 and 9440. Topside resistance now stands at 9600 with subsequent ceilings eyed higher at the upper bound trendline of the newly drawn channel.
All four of the component currencies advanced against the dollar, albeit some with modest gains as uncertainty about the outcome of tomorrow’s EU summit and the looming deadline to raise the debt ceiling remain heavy on investor sentiment, with traders continuing to move out of dollar dominated holdings. The relative performance chart is highlighted by the 0.51% advance in the yen and a 0.42% advance in the euro as traders await positive news that officials have found common ground on a plan for Europe.
Tomorrow’s economic docket eyes the Philadelphia Fed survey, house price index, and June leading indicators. Today’s weaker than expected print on existing home sales disappointed consensus estimates which had high hopes after yesterday’s string of stronger than expected housing data. Traders will remain focused on developments in Europe however as the sovereign debt crisis continues to gather pace in the region. And with the debt talks on Capitol Hill seemingly at a stalemate, the US Dollar Index may be poised for further losses in the sessions ahead.
Upcoming Events
Country | Date | GMT | Importance | Release | Expected | Prior |
US | 7/21 | 12:30 | LOW | Initial Jobless Claims (JUL 16) | 405K | 405K |
US | 7/21 | 12:30 | LOW | Continuing Claims (JUL 9) | - | 3727K |
US | 7/21 | 12:30 | LOW | Fed's Charles Evans Speaks on U.S. Economy | - | - |
US | 7/21 | 13:45 | LOW | Bloomberg Economic Expectations (JUL) | - | -31 |
US | 7/21 | 13:45 | LOW | Bloomberg Consumer Comfort Index (JUL 17) | - | -43.9 |
US | 7/21 | 14:00 | LOW | Fed Chairman Ben Bernanke Testifies Dodd-Frank Ann | - | - |
US | 7/21 | 14:00 | MEDIUM | Philadelphia Fed. (JUL) | 4.5 | -7.7 |
US | 7/21 | 14:00 | MEDIUM | House Price Index (MoM) (MAY) | - | 0.8% |
US | 7/21 | 14:00 | MEDIUM | Leading Indicators (JUN) | 0.2% | 0.8% |
Written by Michael Boutros, Currency Analyst for DailyFX.com
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