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US Dollar Recovery from One-Month Low

H.S. Borji
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US Dollar Recovery from One-Month Low

The US dollar rebounded against a basket of currencies Thursday, recovering from a one-month low that was triggered by disappointing growth data.

The US dollar index advanced 0.1 percent to 80.30 after falling to an intraday low of 80.10 on Wednesday.

Demand for the greenback evaporated Wednesday after the Commerce Department said the US economy contracted at an annual rate of 2.9 percent in the first quarter. That marked the weakest quarter for the US economy since the first three months of 2009.

US durable goods orders in May unexpectedly declined 1 percent, a sign the economy wasn’t rebounding as quickly as initially estimated in the second quarter.

Disappointing growth figures have reinforced the Federal Reserve’s commitment to record-low interest rates. The central bank, which has held rates near zero since December 2008, forecast last week that interest rates would trend below the historical average of 4 percent over the long-term. This suggests policymakers will be slow to raise the cost of borrowing amid the recovery.

Based on the latest projections, economists forecast the first rate hike to be introduced in mid-2015.

On Thursday the Commerce Department said personal income increased 0.4 percent in May, in line with estimates. Personal spending – a measure of the goods and services purchased by households and nonprofit institutions – advanced 0.2 percent following no change the previous month.

Economists forecast personal spending to increase 0.4 percent in May.

In a separate report the Labor Department said initial jobless claims declined 2,000 to 312,000, shifting the four-week moving average to 314,250.

Jobless claims are used to gauge the pace of firings in the labour market. Declining jobless claims are a sign businesses are confident enough to retain staff, which means they are also more likely to hire.

US employers added 217,000 jobs in May, following a gain of 282,000 the previous month. The unemployment rate held steady at 6.3 percent, a more than five-year low.

The EURUSD eased off multi-week highs Thursday, declining 0.25 percent to 1.3597. Initial support is likely found at 1.3575 and resistance at 1.3654.

The British pound rallied past the 1.70 US handle after the Bank of England introduced measures to control the housing market. The GBPUSD advanced 0.15 percent to 1.7009, where it is testing initial resistance. Above this level, the next target becomes 1.7033. On the downside, initial support is likely found at 1.6956.

The USDJPY declined 0.3 percent to 101.55 ahead of several key economic releases from Japan. On Friday the Japanese government will report on consumer inflation, unemployment and retail trade.

The pair faces initial support at 101.45 and resistance at 102.04.

The US dollar weakened further against its Canadian counterpart, but pared its losses later in the North American session. The USDCAD was down 0.03 percent to 1.0716. Initial support is likely found at 1.0706 and resistance at 1.0743.

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