Forex Video Briefing (6/25) – Poor US Data Weighing on the US Dollar

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[videojs mp4=”http://s3.amazonaws.com/fxcom-amazon-s3/2014/06/USD-Slides-after-Poor-Data.mp4″]

Forex Video Briefing (6/25) – Poor US Data Weighing on the US Dollar

The main market mover today was the deeper than expected US GDP revision. The annualized rate of growth in Q1 was revised from -1.0% to -2.9%, which apparently is the biggest of such since records began in 1976. The -2.9% reading was the worst since Q2009. Durable goods data also underwhelmed, with the headline number coming in at -1.0%, and the cored reading at -0.1%.

Let’s take a look at the reactions in the forex market, with a focus on USD/JPY and the US Dollar Index.

The USD/JPY has been consolidating since the end of May. The 4H chart shows the market in a triangle. The poor US data today weighed on the US Dollar, and the pair cracked the triangle support. If the pair can dig below the triangle low at 101.43, the 2014-low of 100.76 will be exposed. However, so far in the US session, traders are trying to keep the pair within the triangle mode. The pullback right now does not invalidate the bearish breakout. However, a rally above 102 could reflect a false breakout, which often suggests strength in the other direction. Also note that the USD/JPY is now back at the 200-day simple moving average, which was tested several times since May. There has not been a daily close below 200-day SMA since Nov. 2012 when the usd-jpy was under 80. The bearish scenario seems to be building up, and a hold below 102 should add to this case.

The USD Index shows that the greenback has been bearish in June since finding resistance around 81. The USD traded sideways last week, but today’s poor US data dragged it to a new low on the month, breaking the previous low at 80.15. The 4H chart shows a market building bearish momentum as evidenced by the RSI which tagged 30 and has been holding below 60. Price action has crossed the moving averages and today’s price action is a “slingshot” off the 200-SMA in the 4H chart. These clues simply reflect a bearish correction against a rally since May from 78.90 to 81.02. However, if the USDX can break below 80.00 and start to hold below the 200-, 100-, and 50-day SMA’s in the daily chart, then, a bearish continuation scenario could be developing at least to challenge the low on the year at 78.90.