By Greg Holden
The US dollar’s mixed results last week, on a fundamental level, may be broken down to a shift in risk appetite and consumer confidence. From a technical standpoint, the movement looks like a consolidating retracement against most of its rivals in anticipation of this week’s news.
Here is a breakdown of this week’s events to give you an idea of how the US dollar will be affected in the days ahead.
Tuesday:
9:30 GMT: GBP – Prelim GDP; Public Sector Net Borrowing
– Both the US dollar (USD) and British pound (GBP) are expecting intense volatility this week, kicking off Tuesday with these two highly impacting reports from Great Britain. Gross Domestic Product (GDP) data tends to create a period of portfolio adjustment by large investors and banks while net borrowing figures represent debt and spending levels in the public sector. Traders should anticipate some intense volatility during this time.
15:00 GMT: USD – CB Consumer Confidence
– Traders experienced last week what a shift in confidence can do to safe havens and higher yielding assets. The EUR rebounded last week against the USD as higher optimism allowed for a move into riskier assets. If today’s consumer confidence shows growing optimism in the United States we could see last week’s trend reverse, but the give-and-take between these two will certainly create intense volatility in the minutes after this publication.
Wednesday:
19:15 GMT: USD – Federal Funds Rate and FOMC Statement
– The Federal Open Market Committee (FOMC) will be releasing a statement about the latest round of interest rate decisions by the Federal Reserve Board on Wednesday evening. Interest rates are expected to remain near 0% for the foreseeable future, but the statement released by the FOMC has the potential to hint at future decisions and speculators take that time to adjust their positions simultaneously, boosting liquidity and potentially shifting the trends of the USD against its currency rivals.
Thursday:
13:30 GMT: USD – Core Durable Goods Orders
– Durable goods orders represents the level of percent change in demand for manufactured goods in the United States. Any decline in manufacturing tends to push the US dollar downward as it signals fewer investors purchasing the greenback in order to buy American goods. If the figure comes in at 0.9% as expected, a decline from last month’s reading, traders may anticipate a bearish USD immediately after it’s publication.
13:30 GMT: USD – Unemployment Claims
– The weekly unemployment claims doesn’t usually have a significant impact on the USD unless the figure is remarkably different than expectations. This week’s report is forecast to remain more or less unchanged from last week’s, meaning the potential for a shocking release is greater than normal. Traders should expect high volatilty on Thursday.
Friday:
10:00 GMT: CHF – KOF Economic Barometer
– The Swiss Konjunkturbarometer (KOF) is a combined reading of twelve economic indicators related to banking confidence, production, new orders, consumer confidence and housing in Switzerland. It is perhaps the most significant report released by the Swiss regarding their economy and tends to have a great impact on the Swiss franc. This month’s reading is expected to have increased from last month’s, suggesting a continuation of the franc’s bullish behavior.
13:30 GMT: USD – Advance GDP
– As with the British Prelim GDP released earlier in the week, the American Advance GDP tends to greatly shift investor portfolios leading to significant swings in USD values. This reading of the American GDP is expected to reveal 3.5% growth in value for American goods, adjusted for inflation, in an annualized format. Meaning, if the data comes in line with expectations, dollar values may increase as it may greatly boost investor appetite for US goods and services.
What to expect:
Last week’s movement among USD pairs and crosses may end up being determined as the beginning of a short-term consolidation pattern since this week’s news is set to effect the greenback heavily. Most reports seem to suggest relative calm, and perhaps even growth, for the US economy. This suggests that, if last week’s movements were in fact a consolidation pattern, this week’s movements may actually see the greenback recovering its losses and shifting back into a bullish posture. Traders should be anticipating the tip of the consolidation trend and the impending reversal.
Forex Market Analysis provided by ForexYard.
© 2006 by FxYard Ltd
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