Home Contraction or Retraction? US Dollar Outlook

Contraction or Retraction? US Dollar Outlook

The US dollar collapsed last week against lots of currencies. This week, American figures stand out in the economic calendar, with Prelim GDP being the last and most important figure. Will American contraction squeeze? How will Consumer Confidence, Home Sales (Existing and New),  Durable Goods Orders.    and the GDP move dollar this week? Outlook for the beaten greenback, with 6 key events.

Last week, the greenback fell to its knees – the main reason was the fear that the US will receive a credit warning. When S&P did to the British Pound, cable fell deeply. Read more about the Pound’s rollercoaster week. This move ignited fears that also the US dollar will receive such a warning.

Let’s look forward. The week begins very slowly, with Memorial Day holiday in the US. Thin trading will give the dollar a chance to make a retraction, especially after the losses it suffered late on Friday evening.

Afterwards, there are 5 key events:

  1. CB Consumer Confidence: This wide survey by the Conference Board is a major indicator for the mood of American consumers. It will be published on Tuesday at 14:00 GMT. After a few dire months in the 20s, the index jumped last time to 39.2. It’s now expected to continue upwards to 42.1. If this is indeed the result, it will show that Americans do believe in recovery, something that will lift the dollar.
  2. Existing Home Sales: A major indicator for the biggest product most Americans consume: houses. They usually buy existing homes, so this figure is very important. It’s published on Wednesday at 14:00 GMT, and is expected to rise from 4.57 million to 4.65 million. After a few months of recovery, I said that American housing is off the bottom. Since then, figures have stabilized. A good figure could help the dollar with retracting last month’s falls.
  3. Durable Goods Orders: This figure indicates the long-living products that Americans buy. It’ll be published on Thursday at 12:30 GMT.  It’s expected to rise by 0.1%. Traders will focus on Core  Durable Goods Orders  which are expected to fall by 0.4%. These figures need to rise and not only stabilize for recovery to be real. This release might send the dollar down.
  4. Unemployment Claims: After getting better for a few weeks, the Chrysler layoffs have pulled this figure back to around 630K. The job market is still the Achilles heel of the American economy. It’s published at the same time of the  Durable Goods Orders. Both releases are probably going to be dollar negative.
  5. New Home Sales: Yup, also on Thursday, but at a different time – 14:00 GMT. Although less significant than Existing Home Sales, the timing of the release, an hour and a half after the previous, major releases, suggests that New Home Sales will also swing the dollar. Expectations are for a rise from 356K to 363K.
  6. Prelim GDP: This is the last, yet most important figure this week. Second release of Gross Domestic Product for the first quarter is published on Friday at 12:30 GMT and is expected to be revised upwards, from a plunge of 6.1% to 5.5%. And this connects to my title: A smaller contraction means a stronger retraction. A deeper contraction will send the dollar even lower.\
  7. Something unexpected: Well, I said there were 6 key events, but as we’ve seen last week, there’s always something unexpected that makes forex trading wild. It may be a credit warning or downgrade, and it may be something totally different… 🙂

The pair that will be most affected from these American figures is EUR/USD – the most popular pair in forex trading. Also the British Pound will be highly affected.

Where will the US dollar go?

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Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.