Dollar rally loses steam as reality bites

5

The dollar was on a roll following the FOMC meeting minutes. The dollar strength was due to a “revelation” that there are also hawks on the committee. The initial dollar strength saw waves of extensions as signs of weakness were seen also in the UK and in Europe.

EURUSD Small Recovery Following Weak US data - Click to enlarge

EURUSD Small Recovery Following Weak US data – Click to enlarge

However, when a big bulk of US figures was released, it was time to discover once again that the US economy isn’t growing that fast. The road to recovery remains long and full of bumps. EUR/USD managed to cling on to support, GBP/USD rebounded and USD/JPY lost ground.

Data

  • Jobless claims rose from 342K to 362K, beyond expectations of 353K. After falling to support (near 5 year lows), this weekly metric jumped back to the previous 360-380K range. These levels still reflect growth, but not that strong.
  • CPI: Inflation is not an issue for a long time, and will remain so. CPI remained flat, under the 0.1% expectations, and Core CPI rose by 0.3%, 0.1% above expectations – nothing to see here.
  • Markit Flash manufacturing PMI: This indicator remained strong, sliding only a bit from 55.8 to 55.2 points. The score, within growth territory, was countered by the Philly Fed Manufacturing Index, which dropped from -5.8 to -12.5 points. The negative figure was contrary to expectations of a positive one. The “re-shoring” process is certainly slow.
  • Existing home sales rose from 4.90 million to 4.92 million, within predictions of 4.89 million. This is a strong sector, and it remains steady for now. Yesterday’s housing starts were disappointing.

Currencies

USDJPY Falls on Weak US figures - February 21 2013

USDJPY Falls on Weak US figures – February 21 2013

  • EUR/USD found support above the 1.3180 line and made a comeback to 1.3230. It lost uptrend support earlier in the day and is breaking down in a head and shoulders pattern. The pair remains weak.
  • GBP/USD, which already fell to 2.5 year lows (see the big levels for this pair), also made a neat leap, much more than the euro, but it also fell more than the euro.
  • USD/JPY continues getting used to two-way action, and fell on the US news. It is now trading in the lower end of the 92-96 range.
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About Author

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 the 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.