US dollar: ourlook for April 17-21

In line with our expectations, the US dollar continued its broad consolidation. It was an eventful week for the greenback.

Firstly, we have to mention the escalating tensions between the United States and North Korea. There’s talk that North Korea is preparing for a nuclear test and, according to the US President Donald Trump, the Asian country is a problem that "will be taken care of". In addition, the US has dropped its largest non-nuclear device on Islamic State in Afghanistan. The development of these tensions will be an important factor for financial markets next week. The escalation isn’t good for the US currency.

The second important thing is that Trump has once again tried to talk the US dollar down by mentioning that he favored low-interest rates and saying that the USD was "getting too strong".

All in all, it seems that the US economy is in a good shape for the Federal Reserve to keep raising interest rates, but the recent news flow has distracted the market from this prospect.

In the coming days pay attention to Empire State manufacturing index on Monday, housing and industrial production figures on Tuesday, Philadelphia Fed manufacturing index on Thursday and existing home sales together with the FOMC member Kashkari’s speech on Friday. In addition, US Treasury Secretary Mnuchin will speak on Thursday and may give more details about the border adjustment tax and incoming fiscal policies.

The USD index met resistance around 101.20, near resistance from January highs and is going to post weekly losses. Support is located in the 100.00 area ahead of 99.10/00 and 98.50. A break above 101.35 is needed to open the way up to 102.10/25.

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Elizabeth Belugina