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The Dollar consolidates after a wild week

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The Dollar consolidates after a wild week

The dollar continued to regain some of its mid-week losses on Friday, as investors moved back into the greenback.  Thursday economic data, showed some weakness with jobless claims showing an unexpected rise, but Friday’s PPI data was somewhat unfortunate, as the last thing the Fed wants to tackle is rising inflation.

Early in the US trading session the Labor Department released its PPI index.  U.S. producer prices rose more than expected in June, increasing by 0.8 percent in June.  Economists had forecast that PPI would climb 0.5 percent last month.  Most of the jump was a function of rising gasoline prices, which could crimp consumer demand.

Core PPI, which strip out food and energy, rose 0.2 percent last month, boosted by a 0.8 percent increase in the price of cars. Economists had expected core prices to rise 0.1 percent.  The annual reading for core inflation at the wholesale level climbed to 1.7 percent from 1.6 percent, which is below the Fed’s target on inflation.

The rise in inflation put a floor yields which helped the dollar gain traction.  When the yield differential moves in favor of the dollar the greenback is able to gain

The technical picture on the EURUSD shows a currency pair that is range bound and having a difficult time finding a direction.  Prior to Ben Bernanke’s comments on interest rates on Wednesday the EURUSD was poised to move lower, but now without strong US economic data, that outcome seems unlikely.

While the 5-day moving average is moving closer to the 20-day moving average to reflect that a downtrend is in place, the MACD is generating a buy signal showing that upward momentum is climbing.  The RSI is printing near 48 which is in the middle of the neutral range describing a consolidative tone.

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