USD Index Forecast for May 2015
USD Index broke down during the course of the day on Wednesday, slicing through the 94 level. This was a very negative sign fot USD Index, and after that breakage, the US Dollar Index went down continue going lower. We believe that selling rallies will be the way to go going forward, and that the US Dollar Index rally may be coming to an end. Because of this, we are very cautiously bearish, as we are still trying to break the overall uptrend that was a bit of a panic.
There have been many negative surprises in recent U.S. reports and the few positive readings contained underlying weakness. While non-farm payrolls rebounded in April, wage growth has been slow, which translated into softer consumer spending. These disappointments have investors wondering which to believe — the data or the Fed. Most U.S. policymakers are still throwing their support behind a 2015 rate hike and even the doves are calling the deterioration in data transitory. They expect the economy to gain traction in the second half of the year but trusting their positive outlook is growing more difficult by the day.
According to the latest report data from US, retail-sales growth stagnated last month after rising 1.1% in March. Lower gas prices contributed to the miss but if we exclude that along with auto purchases, spending still rose by only 0.2% — significantly lower than the 0.6% forecast. First quarter consumer spending is off to a very weak start and that has led to a decline in the dollar, drop in Treasury yields and reduced expectations for Q2 GDP growth. Import prices also fell for the third month in a row by 0.3%, a sign of nonexistent inflationary pressures. We never believed that the Fed would raise interest rates in June and we are still looking for tightening in September, but until we see a consistent improvement in U.S. data, the dollar may have a hard time finding buyers. Producer prices and jobless claims are scheduled for release on Thursday and after low readings for 2 straight weeks, a bounce is expected.
For technical view, the chart supports our forecast. USD Index broke down below 30 and 100 days EMA, which is a very bad signal for it. Also 97.4 was the critical support for USD Index. So with arrived negative data from US, the Index broke the up trend for short and middle term an signalling for a down trend.
Entering buy positions for USD is not a good idea novadays. Traders to buy USD should wait for rising up above 100 days EMA first.
12:22 GMT (14 May 2015) USD Forecast Update
Currently USD Index is around 93.380 and is supporting our view which is down. 92.497 would be expected but more negative data must support this for a while.