USD Index is moving in an Ascending channel and the market has rebounded from the higher low area of the channel
US Dollar Struggles Amidst Disappointing Housing and Job Data
The US Dollar (USD) has faced a rollercoaster of events recently, especially with the disappointing Jobless Claims and Housing data. The earlier gains from the Asia-Pacific (ASIAPAC) session were quickly erased, leading to a shaky performance. In this article, we’ll explore the factors contributing to the USD’s struggles, the key economic data impacting the currency, and what this means for the future. We’ll also take a closer look at the broader market movements and the sentiment in the Forex space.
USD’s Early Gains and Subsequent Struggles
The US Dollar initially saw some positive movement during the ASIAPAC session, but this momentum was short-lived. The release of softer Jobless Claims data and disheartening Housing data painted a bleak picture for the USD. Specifically, the continuing rise in Jobless Claims was unexpected and signaled a troubling trend. This, coupled with the decline in Housing data, raised concerns about the overall economic health.
Jobless Claims and Housing Data
The Jobless Claims data revealed a softer-than-expected figure, with Continuing Claims also rising when a decline was anticipated. This indicates that more people are remaining unemployed for longer periods, which is not a positive sign for the economy. The Housing data added to the woes, showing further softening in the sector. Both Building Permits and Housing Starts missed their estimates, reflecting a slowdown in the housing market. This combination of weak data points puts significant pressure on the USD, making it hard for the currency to hold its ground.
Economic Data and Federal Reserve’s Stance
On the economic data front, the focus shifts to the Federal Reserve speakers. However, not much change is expected in their stance. The market has already been inundated with hawkish messages from Fed officials over the past weeks. The limit of hawkishness seems to have been reached, and the market appears to be growing tired of the same rhetoric.
Fed’s Influence
Federal Reserve speakers, including Minneapolis President Neel Kashkari and Richmond President Thomas Barkin, participated in various discussions. However, their messages were in line with previous statements, and no new insights were provided. The market’s anticipation of these talks had already been factored in, leading to minimal impact on the USD.
Daily Digest of Market Movers
The Asia-Pacific session saw significant moves in the Forex space, driven by various factors. One of the major events was the People’s Bank of China (PBoC) allowing its daily fixing to weaken to a fresh low for 2024 against the USD. This action indicated concerns about the Chinese economy’s performance and had a ripple effect across the market.
USD Index is moving in an Ascending channel and the market has rebounded from the higher low area of the channel
Impact of Global Events
In New Zealand, the NZD/USD pair saw substantial gains after the country’s economy expanded by 0.2% in the first quarter, pulling it out of a technical recession. This positive news contrasted with the Chinese economic concerns and added to the volatility in the Forex market. Asian equities experienced a rollover due to fears about China’s economic health, further influenced by the PBoC’s actions to devalue its currency.
Key Economic Releases
A significant batch of data was released at 12:30 GMT, affecting market sentiment:
- Building Permits: Fell from 1.44 million to 1.386 million, missing estimates.
- Housing Starts: Declined from 1.352 million to 1.277 million, also missing upbeat estimates.
- Weekly Jobless Claims: Initial Claims decreased from a revised 243,000 to 238,000, while Continuing Claims increased from 1.813 million to 1.828 million.
Philadelphia Fed Manufacturing Survey
The Philadelphia Fed Manufacturing Survey for June also missed expectations, coming in at 1.3 compared to the previous 4.5 and missing the consensus of 5. This series of disappointing data points further pressured the USD and influenced market sentiment.
Market Sentiment and Future Outlook
Despite the negative economic data, equities remained in a relatively positive tone. European equities managed to hold on to gains, and US futures were up by around 0.50% ahead of the US opening bell. This indicates a degree of resilience in the broader market, even as specific sectors struggle.
CME FedWatch Futures
The CME FedWatch futures for September showed an increased likelihood of a rate cut, with a 59.5% chance for a 25 basis point cut. This sentiment reflects the market’s anticipation of easing measures to support the economy amidst the ongoing challenges.
Broader Market Movements
The US 10-year benchmark rate saw a slight uptick, trading at 4.26% from the earlier 4.24% on Thursday. This minor movement indicates a cautious market sentiment, balancing between the disappointing data and the potential for future rate cuts.
Final Summary
The US Dollar’s recent performance has been a tale of early gains erased by disappointing economic data. The Jobless Claims and Housing data pointed to a struggling economy, adding pressure on the USD. While the Federal Reserve’s hawkish stance remains, the market seems to have reached a saturation point with such messages. Global events, particularly from China and New Zealand, added to the market’s volatility. Despite the negative data, equities showed resilience, and the CME FedWatch futures indicated a potential rate cut in the near future. The broader market movements reflect a cautious yet optimistic sentiment, as the market navigates through these challenging times.
In this ever-changing economic landscape, staying informed and adaptable is key. As the USD faces pressures from various fronts, understanding these dynamics can help in making better-informed decisions in the Forex market.
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