DXY, USD/JPY Outlook (5/26 – 5/30) – Technical Analysis and Fundamental Risks


Technical Analysis:
The USD has been strong for the most part in May. The USD Index (DXY) has been sideways to bearish for most of 2014, falling to a low on the year at 78.90 in early May. It has since rebounded, and closed the previous week at 80.35.

DXY Daily
dxy 5/26

The daily chart of the DXY shows a revival of USD-strength. It appears that holding above 80, and pushing above 80.60 would be an additional bullish signal for the USD.

In this bullish USD-scenario, look for the USD/JPY to also rally. The US Dollar – Japanese Yen has found support just above the 2014-low. If the DXY extends the current bullish push, look for USD/JPY to also challenge the 103 level, and the falling trendline seen in the daily chart. Then a break above 103 and the falling trendline, should open up 104, and the 105.44, 2014-high.

usdjpy 5/24

If the DXY fails to push above 80.60 and falls back below 79.80, the USD/JPY is likely going to have trouble pushing above 103, keeping it in consolidation, with some bearish bias, and focus toward the 2014-low at 100.75.

Previously: USD/JPY Trading at Key Resistance Factors

Fundamental Releases:
What are the key fundamental releases scheduled for the upcoming week? There aren’t many top-tier event risks like the FOMC meeting, but the GDP revision might shake it up a little. Otherwise, the impact from US fundamentals will likely limited this week for the greenback.

After a bank holiday – Memorial Day on Monday, we get durable goods on Tuesday (527) at 8:30AM ET, for the month of April

Durable Goods Orders
Forecast: -0.7%
Previous: 2.9% (revised up from 2.6%)
Core Durable Goods:
Forecast: 0.2%
Previous: 2.4% (revised up from 2.0%)

CB Consumer Confidence index:
Forecast: 83.2
Previous: 82.3

cb consumer confidence

The Conference Board Consumer Confidence numbers have been trending higher, and is forecast to improve to the highest level since January 2008. After the durable goods orders number, we get the CB consumer confidence reading at 10:00AM ET, 5/27.

Prelim Q1 GDP
Forecast: -0.6%
Advanced GDP Reading (from 4/30): 0.1%

On Thursday, 8:30AM ET, a heavy downward revision to Q1 growth is expected from economists, mostly based on revisions to business inventories and business investment. Fewer core shipments point to less capital spending. Construction spending is also being revised down.

Some upward revisions include residential investment, consumer spending and retail sales.

Q1 data paint a blurry picture due to the harsh winter weather. Traders will likely be more sensitive to Q2 growth for policy implications. Still, if the revision does place a -0.6% growth rate for Q1, it will make it hard for USD to gain as monetary policy will likely have to remain loose in a fragile economic recovery. Last time GDP growth was negative was Q1 of 2011.

Core PCE Price Index:
m/m for April
Forecast: 0.2%
Previous: 0.2%

The FOMC uses this inflation gauge for policy decisions. We saw an increase from 0.1% to 0.2% in the data for March. Any reading above 0.2% should have some bullish effect on the US dollar as it will add pressure to tighten monetary policy sooner rather than later in 2015.

To contact the reporter of this story, email Fan Yang at fan@forexminute.com