Many signs of recovery seen in the US send the dollar higher across the board. With a little help from Greece as well. A look at the big picture.
After an alarming rise in unemployment claims last week, they dropped back down – from 480K to 456K, getting back in the zone. This breaks the bad trend and also gives hope for another break of the 430K line that this indicator failed to break. Jobless claims are the best indicator for the all-important Non-Farm Payrolls figure. But other indicators supported this as well:
The housing sector is also enjoying a recovery. Existing home sales went up from 5.01 to 5.35 million, exceeding expectations. This 6.8% rise shows that consumers are becoming more active in economic decisions.
The producer price index (PPI) jumped by 0.7%, much more than 0.4% that was predicted. This rise erased last month’s 0.6% drop. This still isn’t a trend that can lead to a rate hike, but it’s another sign of economic activity.
The last factor that moved the dollar today was bad news elsewhere – yet again, the Greek crisis took another bad turn. A workers’ strike in Greece and growing worries about German help sent the Euro down. EUR/USD reached the year-to-date low of 1.3267 and bounced back. It’ already a triple bottom. At the time of writing, there is still a chance of the pair breaking down towards 1.3080.
The Greek problem isn’t limited to Greece – debt worries trigger risk aversive trading, boosting the dollar and the yen across the board.
Dollar index rising
All these events, on a very busy day, lead the dollar index to move from 81.20 to 81.65, after already reaching 81.80. Since the big weekend gaps almost two weeks ago, the greenback has been recovering slowly. Today’s move was a rather strong one.
The next target is 81.97, which was the peak on April 8th.The next target, 82.24, isn’t too far. This was the peak on March 25th, and is the highest level since May 2009. Breaking above this level will be a significant step.
The dollar bottomed out at the end of November 2009, with the index touching 74. It has been on the rise since then, but struggled to make stronger moves after going above 81.
The big picture for the long term is that the US economy is recovering steadily and it’s taking the dollar with it.
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