Today, on June 2nd, at the beginning of the European trading session, the USD index gained 0,27% against 6 other currencies. The strengthening tke place mainly due to the forthcoming weakening of the common currency planned by he ECB as well as an economic slowdown in several eurozone economies.
If to consider several economic factors, they can be split in half. One group of drivers indicates that the state of affairs in the US economy is not as good as one might thing since th demand is going down. According to the latest report, the rate of unemployment reached 6,3% in April. However, this report failed to take into account the current situation in the US labor market. In particular, the report doesn't include part-time jobbers and those who gave up looking for a job. If to take those factors in to account, the real rate of unemployment should be somewhere around 13%.
The average household income (ex taxes) has increased by as little as 1,2% over the last 4 quarters. At the same time, the average consumer spending is up by 2,2% during the same reporting period.
Is the external demand supporting the US economy? In general, the trade balance deficit is down by 10% as compared to 2013. The Eu, and Germany in particular, is the USA's major export rival. The EU's trade surplus reached 9%.
Analysing the second group of drivers, we can say that the budget-and-tax policies remain the some of the major issues in the USA. These become especially burning in advance of the US congressional and presidential elections scheduled for 2015 and 2016 respectively.
According to economic theory and common sense, weak demand coming from the private sector has to be covered by tax cuts coupled with higher budget spending in order to back the existing economic growth. Still, Washington doesn't seem to be planning tax cuts and spending hikes. Everything looks the opposite way – spending cuts and tax hikes.
The USA seems to suffer from excessive money supply and inefficient money spending. Well, the same holds true fro the EU. If the Fed abstains from financing the private sector, the US economy may see a further slowdown. At least, there will be no recovery.
USD Index
Masterforex-V Academy aahs analyzed the current situation in the market of the USD index to find out the near-term prospects of the US Dollar against a basket of 6 other major currencies.
In particular, the index is up by 0,27% today thanks to weaker-than-expected economic reports from the eurozone. The short-term bias is bullish. It is very likely that we will see a further rally, which may ultimately reverse the mid-term tendency, turning it bullish.
If the US Dollar strengthens further amid a weaker common currency and strong economic figures from the USA, we are likely to witness a rally up to the MF pivot located at 80,48 and maybe even higher. If this is the case, the next targets to watch are 80,60 and 80,83.
Alternatively, the bears will manage to stand their ground if the price goes down to touch 80,31 and 80,17.
