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US Dollar Holds its Ground

H.S. Borji
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US Dollar Holds its Ground

The US dollar was little changed against a basket of currencies Monday, as a dearth of economic data kept forex traders on the sidelines ahead of an active week that features several high profile data releases.

The US dollar index, a gauge of the greenback’s performance versus six commonly traded peers, advanced 0.04 percent to 80.22. The dollar index has tread water over the past five days amid a light economic release schedule.

The economic calendar heats up Tuesday with the release of June retail sales. Retail sales in June are forecast to grow 0.6 percent, double the rate of the previous month. Retail sales excluding automobiles are forecast to have increased 0.5 percent, following a 0.1 percent gain the previous month.

Business inventories – a measure of stockpiles held by manufacturers, retailers and wholesalers that is used to calculate gross domestic product – are forecast to have increased 0.6 percent in May, following an identical increase the previous month.

On Tuesday Federal Reserve Chair Janet Yellen will testify before Congress on the state of the economy and monetary policy. The two-day monetary policy testimony will likely see Yellen stress the need for low interest rates even as the central bank plans to eliminate quantitative easing in the fall.

Fed officials agreed at the June policy meetings that quantitative easing would end after the fall rate announcement, provided the economy continues to recover at an expected pace. The central bank has trimmed the pace of monthly bond buying by $50 billion since December.

The Fed’s outlook on growth was revised at the June meetings after a disastrous first quarter saw the economy contract at the fastest pace since 2009. The US economy contracted 2.9 percent annually between January and March, according to revised estimates from the Commerce Department.

The Fed now believes the US economy will grow between 2.1 percent and 2.3 percent this year, compared to a previous estimate of closer to 3 percent.

On Wednesday the Board of Governors of the Federal Reserve System will report on industrial production for the month of June. Industrial production is forecast to have expanded 0.4 percent last month, following a gain of 0.6 percent in May.

The National Association of Home Builders will report on homebuilder confidence Wednesday, followed by government data on building permits and housing starts Thursday.

In currency trading, the US dollar advanced against the yen amid stronger Japanese factory data. Japanese industrial production increased 0.7 percent in May, following a 2.8 percent decline the previous month. Compared to May 2013, industrial production was up 1 percent.

The USDJPY advanced 0.32 percent to 101.57. The pair is testing the 101.56 resistance. Initial support is likely found at 101.18.

The dollar strengthened against the British pound, as the GBPUSD declined 0.2 percent to 1.7075. The pair is trading above the 20-day average of 1.7065. Initial support is likely found at 1.7057 and resistance at 1.7147.

The dollar weakened against the euro amid better than expected Eurozone industrial production figures. Eurozone industrial production declined 1.1 percent in May, exceeding estimates for a 1.2 percent decline. Year-on-year, industrial production advanced 0.5 percent.

The EURUSD advanced 0.08 percent to the ten-day average of 1.3619. The pair is supported at 1.3590 and faces resistance at 1.3625.

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