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US Dollar Rebounds, Consolidates Higher

H.S. Borji
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US Dollar Rebounds, Consolidates Higher

The US dollar index rebounded Friday amid weak German producer inflation data and remarks from Bank of Japan Governor Haruhiko Kuroda that Japan was only halfway to reaching its 2 percent inflation target.

The US dollar index, a broad performance gauge of the greenback’s strength versus six commonly traded peers, advanced 0.17 percent to 80.46. Friday marked the first gain for the index in three days.

The greenback weakened in the second half of the week after the Federal Reserve signaled interest rates would be slow to increase. Top Federal Reserve officials indicated longer-term inflation would probably remain below the historical average of 4 percent, a sign lawmakers won’t raise rates too quickly during the recession.

Nevertheless, the central bank reduced the pace of bond purchasing by another $10 billion, citing improvements to the labour market.

The US economy added 217,000 nonfarm payrolls in May, while the unemployment rate fell from 6.4 percent to 6.3 percent.

The EURUSD fell back below the 1.36 handle after German producer inflation unexpectedly declined in May. German producer prices fell 0.2 percent in May, the Federal Statistics Office reported today. Year-on-year, the producer price index declined 0.8 percent.

The EURUSD was trading at 1.3575, declining 0.24 percent. The pair is testing initial support at 1.3579. Below that level, 1.3550 is the next target. Resistance is likely found at 1.3640.

The USDJPY advanced Friday to its highest level since the Federal Reserve meetings. The pair advanced 0.19 percent to 102.14. Initial support is likely found at 101.79 and resistance at 102.19.

BOJ Governor Haruhiko Kuroda said today Japan was still only halfway to achieving its 2 percent inflation target. Speaking at the annual meeting of the National Association of Shinkin Banks in Tokyo, Kuroda acknowledged the economy was making steady progress to reach its goal and reaffirmed the BOJ’s commitment to continue with quantitative easing until the inflation target was reached.

The GBPUSD eased off its nearly six-year highs but remained supported above the 1.70 handle. The pair dipped 0.1 percent to 1.7023. The pair faces support at 1.6989 and resistance at 1.7077.

The UK government borrowed more money than forecast in May, the Office for National Statistics reported today. UK public sector net borrowing in May increased from £9 billion to £11.477 billion.

The USDCAD fell sharply after Canadian inflation rose at the sharpest pace in more than two years, while retail sales registered the biggest increase in 11 months. The USDCAD plunged 0.54 percent to 1.0762. The pair is testing support at 1.0762. Initial resistance is found at 1.0893.

The US had a quiet release schedule Friday. Action heats up Monday with manufacturing PMI and previously-owned home sales.

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