Dollar Rebounds As Markets Await Fed Chair Yellen

Asian markets open the week mixed with Nikkei trading mildly higher by 0.25% at the time of writing but other indices are in red. In the currency markets, Dollar pares back some of last week’s lost and trades mildly higher as markets await clues on the timing of next Fed hike. Fed vice chair Stanley Fischer said that Fed is “close to our targets” and he expected GDP to “pick up in the coming quarters, as investment recovers from a surprisingly weak patch and the drag from past dollar appreciation diminishes.” Also, Fischer noted that core CPI at 1.6% was “within hailing distance of 2 percent” while employment market has been “remarkably resilient”. The comments suggested that Fed is still on course for another rate hike this year. But the main focus will stay on Fed chair Yellen’s speech at the Jackson Hole symposium later in the week.

The dollar index rebounded after hitting near term channel support. A short term bottom is likely formed at 94.07 and further rise would be seen to 55 days EMA (now at 95.61) and possibly above. At this point, we’re not seeing firm upside momentum in the index yet and it might feel heavy again ahead of 97.56 resistance. Firm break of 97.56 is needed to confirm underlying momentum or we won’t turn bullish in the index yet. Meanwhile, rejection from 55 days EMA will suggests that rebound from 91.91 has completed at 97.56 (with three waves). That will carry bearish implication for another low below 91.91 ahead.

US Dollar Index

Looking ahead, the economic calendar is relatively light this week. Eurozone PMIs and German Ifo are the main focus in Eurozone. UK will release Q2 GDP revision. US will release Q2 GDP revision, durables and some housing data. Japan will feature CPI. The focus will be on Fed chair Yellen’s speech on Friday. Here are some highlights for the week:

  • Monday: Canada wholesale sales
  • Tuesday: Japan PMI manufacturing, Eurozone PMIs, consumer confidence; US new home sales
  • Wednesday: New Zealand trade balance; German GDP final; UK BBA mortgage approvals; US existing home sales, house price index
  • Thursday: German Ifo; US durable goods orders, jobless claims
  • Friday: Japan CPI, Eurozone M3; UK GDP revision; US GDP revision, trade balance
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