The Dollar Is Range Bound
The Dollar Index has been ranging for the last two months and it looks like that range will continue, at least in the near-term. Last week’s FOMC minutes, the economic data, and lingering COVID-19 epidemic are weighing heavily on the greenback as it is on every world currency. The tug-of-war is likely to continue until a clear indication the pandemic is easing and/or an economic rebound is underway. This week, traders will be looking for several highly important data points each with the power to move the market. If all are in favor of one viewpoint or another, i.e. economic rebound or economic destruction, the market could make a large move indeed.
The top of the list is the Beige Book. The Biege Book is important for two reasons the more important being its view of the economy. Although the Beige Book is in many ways a lagging indicator the commentary and outlook will be the most important aspect. What the Federal Reserve Governors have to say about their respective districts and how reopening is affecting them will be the guiding hand for traders in the coming weeks. The second reason why the Beige Book is important is because it signals an upcoming FOMC meeting, a meeting only two week’s away.
Other data on the list this week is the jobless claims figures, the most current and currently important data point the market is watching, and the Income and Spending figures. The underpinning force of the U.S. economy is the consumer so this data is ultra-important. We can expect to see wages rise because most of the affected job-losses are in low-end work (and because many employers gave big raises and bonuses to their “essential” workers). We can also expect to see spending fall (maybe) because people are locked up and can’t get out to do things.
The Technical Outlook : Rangebound With Downward Bias
The technical outlook is rangebound but there is a downward bias. Not only is price action moving lower it is accompanied by bearish indicators that suggest downward momentum may grow. There is a possibility for support to kick in at the $99 level but it is uncertain at best. The more certain support target is at the bottom of the range near $98.50. This level is likely to hold provided there are no major negative surprises in the data or Beige Book report.