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US Dollar Fails to Advance on Strong Data

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US Dollar Fails to Advance on Strong Data

The US dollar remained elevated Tuesday, but failed to capitalize on a spate of upbeat economic data pointing to a stronger recovery in the second quarter.

The US dollar index, a weighted average of the greenback’s performance versus six commonly traded peers, was at 80.36, relatively unchanged from the previous close of 80.39. The US markets were closed Monday in observance of Memorial Day.

Tuesday unleashed of flood of economic data to the markets, including reports on durable goods orders, services PMI, consumer confidence and manufacturing activity. Most indicators met or exceeded forecasts, supporting the view the economy was regaining momentum in the spring following a subdued first quarter.

US durable goods orders increased 0.8 percent in April, far outpacing expectations, which called for a decline of between 0.5 percent and 0.8 percent. Excluding transportation, orders rose 0.1 percent.

The US service economy accelerated at a sharp pace in May, as output growth reached a 26-month high. The Markit services PMI indicator rose 3.4 percentage points to 58.4, surpassing estimates.

US consumer confidence improved slightly in May, led by stronger appraisals of the current situation and of future expectations, the Conference Board reported today. The consumer confidence index rose from 81.7 to 83.0, matching forecasts.

The Richmond Fed manufacturing index, which tracks the performance of the Fifth District’s manufacturing sector, increased from 5 to 7 in May, led by stronger employment trends and higher average wages.

The Fed Bank of Dallas reported a slowdown in Texas’ manufacturing sector, as the overall business outlook waned. The manufacturing business index declined from 11.7 to 8.0 in May, signaling a slower rate of expansion.

The dollar strengthened versus the euro. The common currency was still hampered by comments from European Central Bank President Mario Draghi, who said on Monday the central bank is concerned about the emergence of a deflationary cycle in the Eurozone.

The EURUSD fell to an intraday low of 1.3613. The pair consolidated at 1.3636, declining 0.05 percent. Initial support is likely found at 1.3630 and resistance at 1.3671.

The British pound fell sharply against its US counterpart as UK mortgage approvals fell in April for the third consecutive month, according to the British Bankers’ Association. Approvals dropped from 45,000 to 42,200. Forecasts called for a slight gain over the March reading.

The GBPUSD was recovering from an intraday low of 1.6783. The pair was trading at 1.6813, declining 0.18 percent. Initial support is likely found at 1.6792 and resistance at 1.6862.

The US dollar clawed back intraday losses versus the Canadian dollar. The USDCAD was trading at 1.0859, virtually unchanged from the previous close. Initial support is likely found at 1.0843 and resistance at 1.0867.

The USDJPY was holding steady just below the 102 handle. In economic data, Japanese inflation continues to point upward. The corporate service price index rose 3.4 percent annually, exceeding estimates. The Japanese government will close out the week with data on consumer price inflation.

The USDJPY is trading steady at 101.96. Initial support is likely found at 101.77 and resistance at 102.00.

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