Dollar Climbs On Hopes Of Multiple US Rate Hikes

The Markit Institute reported on Friday that, retail sales in the euro area dropped sharply at the start of the second quarter. The retail PMI in April edged down to 47.9 from a reading of 49.2 in the previous month. This is the steepest fall in sales in over a year.

Compared with the same period last year, turnover in the retail sector also witnessed a decline last month, instead of following the expected growth curve on an annual basis in March.

Data released today showed a better-than-expected reading for the sentix investor confidence index for the Eurozone. The index reading for May registered at 6.2 points, a little higher than economists’ forecast of 6.1. Last month, the index was at 5.7 points.

Today, the President of Eurogroup meets with finance ministers from euro area member states and the ECB President. The meeting is held with the purpose of discussing a range of financial issues. Hence, investors are eyeing statements and clues from the meeting for decoding future policy moves. At today’s meeting, ECB’s Vítor Constâncio commented that the central bank was still able to guide inflation back to near the target of 2% this year and their stimulus measures deployed in March need time to come into effect.

In the US, the non-farm data was released on Friday with 106,000 added jobs in April, the lowest level in seven months. The expectation  in the market was for a reading of 203,000 new jobs. After the report, the US dollar dropped significantly and marked a record low in over a year. However, the currency quickly trimmed the losses due to  encouraging annual wage growth, and comments from Fed member Dudley that two rate hikes this year is a reasonable expectation.

Today, the dollar index DXY extended its current uptrend and advanced to 94.10, 0.2% higher the previous close. This reflects that the greenback is getting stronger against its peers.

eurusd d1

Fig. EURUSD D1 Technical Chart

ADX (14) has lowered to 28.9051, indicating that the current uptrend is getting feeble. After hitting the resistance of 1.16119 on May 03, the Euro is on track to weaken against the USD. However, the trend signal indicator still encourages a buying position, and the price is expected to hit the level 38.2% of Fibonacci retracement and then may bounce back, continuing its up move.

Trade suggestion

Buy at 1.14089, Stop loss at 1.13625, Take profit at 1.14875.

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