Today, on June 27th, the US Dollar index is down by 0,15% against a basket of 6 other major currencies at the beginning of the European trading session. The US Dollar has been showing weakness since the release of disappointing figures on the US economy coupled with geopolitical risks.
In particular, the USD index, which is a pretty popular instrument among Forex traders, has already reached the 5-week low at 80,08. It came as the result of the disappointment with the recent data that came from the USA. This made many traders and investors abandon the dollar market for other alternatives. The recent weak data indicate discontinuous recovery, Market Leader reports.
In particular, consumer spending, which accounts for more than 70% of the US GDP, gain as little as 0,2% while analysts had expected 0,4%. These data followed the pessimistic forecast for the US economic activity in Q1 2014. The US GDP dropped by 2,9% during the reporting period.
As the result, investors purchased bonds, which triggered 10-year bond yield price growth, thereby dropping the yield by 0,03% up to 2,53%. This is also pressing the American currency. Last week, the 10-year bond yield was equal to 2,62%.
The US stock market has been going down fro 3 days. The sharp drop shown by indices during the American trading session was probably triggered by big-scale investors that responded to the negative reports with reducing exposure and cashing out to protect their portfolios. Such activities are common in advance of quarterly reports.
At the same time, gold went on rallying amid higher inflation in the USA coupled with the news about illegal gold-backed loans in China. Market participants are afraid of a decline in the import demand for gold amid likely policy toughening. The current armed conflict in Iraq adds fuel to the geopolitical fire, thereby supporting gold prices and pushing down the Dollar, Market Leader reports.
According to Masterforex-V Academy, the H1 chart of the USD index indicates a move within the scope of an MF sloping channel. The price has been trying to recover from 80,08 since the beginning of the European trading session. At this point, this is a bullish reaction.
The closest level of resistance to watch is 80,26. If the price breaks and consolidates above it, we are likely to witness a further rally up to 80,38 and the top of the MF sloping channel. If the top is broken as well, this will give way to 80,43-80,49.
Alternatively, a decline down below 80,08 will give way to 79,88. The scenario is marked red.
