USD: outlook for September 4-8

USD: outlook for September 4-8

The US dollar index (DXY) dipped to 91.55 before recovering to 93.30 area, but the descending trend line didn’t let the greenback to push higher and it reserved back to the downside.

The fundamental picture for the US currency looks rather grim. Geopolitical tensions increased as North Korea launched a missile that flew over Japan on Tuesday and Trump’s Administration ordered to close 3 Russian diplomatic facilities in the United States. On the domestic front, hurricane Harvey may be the most expensive natural disaster in US history. According to the weather forecaster AccuWeather, it will cost the economy about $190 billion. No big announcement on the US tax reform came from Donald Trump. Finally, US labor market figures for August brought a big disappointment. America created only 156K jobs vs. 180K expected. The unemployment rate increased to 4.4% and monthly wage growth slowed down to 0.1%.

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Other data from the US turned out to be mixed. American economy performed better than expected in the second quarter, as preliminary GDP growth was revised from the initial estimate of 2.6% to 3.0%. However, inflation keeps hovering at low levels – this may pose an obstacle to the Fed’s rate hikes this year. Consumer spending rose slightly less than expected in July, but consumer confidence came out strong.

US banks will be closed on Monday as the nation will celebrate Labor Day. All in all, the week will be lighter on the data front. Pay attention to ISM services PMI on Wednesday and unemployment claims and crude oil inventories on Thursday.

American currency remains within a downtrend. Declines below 92.00 (50-month MA) and 2016 low at 91.88 will bring DXY to 2015 low at 90.70. The greenback needs to return above 93.00 to reverse this trend and get a chance to rise to 94.00.

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