Volatility has greatly diminished in USD/JPY. The pair is consolidating in a narrow range on H4, and a breakout is coming.
US dollar outlook from major banks
The US dollar was lower against most of its major peers since the very start of the week, pressured by a round of disappointing economic data and by gains made by commodity-sensitive currencies as crude oil futures spiked to its highest level since late April. Saudi Arabia and Russia said they would extend the production cut agreement for another nine months.
The greenback fell after the Empire manufacturing index posted a massive drop to -1.0 from the prior month reading of 5.2. That data came after the missing retail sales and below estimates CPI data released last Friday. The US dollar index was down for the fourth day. It is near 98.44 of writing from last-Thursday’s high at 99.77.
Strategy research teams of major banks commented the recent weakening of the USD and indicated underlying factor that will influence the US currency in the near-term future.
GBP/USD forecasts from the Toronto-Dominion Bank
The TD strategists note that USD was hit by Friday’s disappointing releases of US retail sales and CPI data.
TD recommends buying USD dips against GBP from current levels into 1.29. They expect a softer retail sales headline (the figures will be released on Thursday at 11:30 am MT time), which is likely to make sterling vulnerable in the near term. The bank’s analysts remain sellers of GBP as the positive outcome of the UK general elections is already priced in and Britain’s data starts deteriorating.
US dollar forecast from Credit Agricole CIB FX Strategy Research
Credit Agricole analysts believe that the missing US CPI data validates the flatness of the front end of the yield curve and thus prevents USD from going higher. It also offers a solid support to the risk environment and emerging market currencies.
The CA’s analysts note that this week is very light in terms of economic data, so the USD might see some further selling pressure.
US dollar forecast from BTMU FX strategists
BTMU FX strategists outline the three factors that are working together against USD:
- The European political risk premium has shrunk following the Macron’s win in French presidential election and Merkel’s party success in German regional elections.
- Trump reflation trading optimism has eased.
- Central banks throughout the world have started to shift their guidance suggesting their counterparts will soon follow the tightening path initiated by the Fed’s officials.
The analysts are bearish on the USD. They expect a 4% drop in the DXY index at the end of the Q1 2018. They believe that Fed’s multiple hikes will unlikely provide much support for the USD as other central banks are determined to limit the scope for any shift in yield spread in favor of the greenback.
The market is likely going to continue declining. The main intraday target is the next support at 1.1526 - 1.1508...
Bullish Ichimoku Cloud with horizontal Senkou Span A and B; a golden cross of Tenkan-sen and Kijun-sen with horizontal lines; the market is under strong resistance and prices entered into the channel Tenkan-Kijun.
AUD/CAD falling inside impulse waves 3 and (C) Next sell target - 0…