What’s Happening?

With the spotlight for traders shifting back to economic reports from politics this week, the US Dollar may attract more attention as the hub of currency trading. The Dollar has been actively trading around the 100.00 round number lately. Swings in the dollar off the news could have a significant impact on gold and other currency markets.

Technicals:

The US Dollar index has been active over the last month swinging between 99.00 and 102.00. A selloff that breached 100.00 ended with a dip down toward 98.70 that appears to have flushed out selling pressure for now.

In the last week the index has been in an upswing rallying up off of 99.00 through 100.00 which completed a rounded bottom. The Dollar has since rallied on toward 100.50 where it has paused for a rest. Next potential support appears near 101.00 then 101.60.

The RSI indicator recently regained the 50 level signalling a change in momentum from downward back to upward.

 

Fundamentals

The main factors driving the US Dollar up and down of late have been sentiment toward US political risk and speculation on how hawkish the Fed may be this year.

Through March, the health care debate and sabre rattling over trade weighed on the Dollar. The failure of health care reform to reach a vote reminded traders that presidential power has its limits no matter who is in charge, while moving from inflammatory rhetoric on trade to actual details has eased some concerns. This week US political speculation is likely to focus on tax reform.

This week there is a lot of economic data from the US for traders to react to, including manufacturing PMI and construction spending Monday, non-manufacturing PMI and ADP payrolls Wednesday and nonfarm payrolls on Friday.

These reports may be dissected by traders through the filters of what they show about how the US economy is responding to President Trump so far, and what they could mean for the Fed’s interest rate plans for this year. Strong results would suggest a more hawkish Fed which could boost the dollar. Weak numbers would suggest less pressure on the Fed to raise rates aggressively and could knock the Dollar back down.

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