Intraday Market Thoughts

US Dollar Makes a Stand

by Adam Button
Aug 29, 2017 21:22

Whether it is just a month-end wobble or something more, the US dollar deployed a robust Tuesday reversal on positive economic signs. The Swiss franc was the top performer Tuesday while the yen lagged. Japanese retail sales are up next. Our Premium short in #EUROSTOXX50 hits the final 3380 target following the 3520 entry. Gold and silver hit their final targets yesterday. The upcoming moves will be discussed in the next Premium video due out in Wednesday Europe morning.

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USD/JPY struggled early on Tuesday after North Korea launched a missile test that crossed Japanese airspace. The pair fell to a four-month low of 108.27 but later reversed higher to 109.90 – a 12-day high. It was a similar story across the board as the risk trade quickly faded and the dollar captured a bid. That was despite US 10-year yields falling to the US election.

The reversals in gold, USD/CAD, cable, USD/JPY and elsewhere muddle the picture. Quietly, EUR/JPY also rose to the highest since January in a break of the eight-week range. Whether the daily candle in gold is a true doji or gravestone doji remains to be seen. Ashraf's Premium video will shed more insight tomorrow.

USD strength emerged after the Conference Board's August consumer confidence rose to 122.9 compared to 120.7 expected. It was the second-best reading since 2000 and was driven by the 'current conditions' index, which is more reliable than the 'expectations' index because the latter has become more of a political-happiness gauge.

It's far too early to claim any kind of US dollar turn. Washington and the Fed are likely to be near-term headwinds. In addition, even the technical reversal is tenuous. Aside from USD/JPY, the US dollar basically finished flat.

The days ahead will be key as non-farm payrolls draw closer, but before that we have the ISM and ADP.

Looking ahead, Japanese retail sales are due up at 2350 GMT and expected to rise 1.0% y/y, a slowdown from the 2.2% pace in June. That's not likely to be a market mover but the rest of the day has some high-tier data including German CPI, ADP employment and the second look at Q2 US GDP.

Act Exp Prev GMT
Retail Sales (y/y)
1.1% 2.2% Aug 29 23:50
FOMC's Powell Speaks
Aug 30 13:15
ADP Employment Change
186K 178K Aug 30 12:15

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