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US dollar index reaches 80

H.S. Borji
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The US dollar index edged higher Tuesday, as weak Eurozone data sent the EURUSD pair to fresh lows amid disappointing US retail sales.

The US dollar index, a weighted average of the dollar’s performance versus six major currencies, climbed to a daily high of 80.14. The index would consolidate at 80.03, up 0.16 percent ahead of business inventories data.

The EURUSD pair fell below the 1.37 handle for the first time since late-February amid signs German and Eurozone investor sentiment declined sharply this month. The EURUSD briefly touched 1.3699 before rebounding to 1.3727, a loss of 0.23 percent. The pair was unable to hold initial support at 1.3752, leaving 1.3718 as the next target. On the upside, technical resistance is likely found at 1.3780.

German and Eurozone investor sentiment declined sharply this month, the Centre for European Economic Research (ZEW) reported today. Economic expectations in Germany fell to a 16-month low amid signs the German economy would not be able to maintain its current growth levels.

Germany’s economic sentiment indicator fell from 43.2 to 41. Economists forecast a slight dip to 41. The gauge of the current situation appreciated from 59.5 to 62.1.

“The decline of the experts’ economic expectations for Germany should be seen against the backdrop of a strong economic development in the first quarter of 2014,” said ZEW president Dr. Clemens Fuest in a press release. “Already, there are indications that Germany will not be able to maintain this fast pace of growth. Nevertheless, one can assume a positive underlying trend for the economic development for the year 2014.”

Economic expectations declined sharply throughout the Eurozone. The expectations gauge fell from 61.2 to 55.2, ZEW data showed.

In the United States, economic data were equally disappointing, as investors assessed the latest reading of retail sales. Retail revenues increased 0.1 percent in April, after a revised gain of 1.5 percent the prior month that was also the largest since March 2010, the Commerce Department reported today in Washington. The subdued reading tempered expectations for a rapid recovery in the second quarter after the economy barely expanded in the first three months of the year.

The Commerce Department will also report on business inventories later in the day.

In other trading, the GBPUSD continued to backtrack Tuesday, declining 0.11 percent to 1.6849. The pair fell below the initial support of 1.6856, leaving 1.6814 as the next target. On the upside, resistance is likely found at 1.6916.

The Office for National Statistics on Wednesday will report on UK employment. The ILO unemployment rate is expected to have fallen from 6.9 percent to 6.8 percent in the first quarter.

The USDJPY was unchanged in the early North American session, trading at 102.1250. Initial support is likely found at 101.96. Technical resistance is targeted at 102.37.

The Australian dollar rebounded after declining on the heels of weak Australian and Chinese data. Australian house prices increased 1.7 percent in the first quarter, well below expectations calling for 2.9 percent, the Australian Bureau of Statistics reported today. Meanwhile, Chinese industrial production, retail sales and urban investment rose at a slower rate than forecast in April.

In the North American session the AUDUSD was trading at 0.9378, up 0.16 percent. That puts it right around the daily technical resistance, currently marked at 0.9374. On the downside, initial support is likely found at 0.9334.

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