Currency Analyst since 2010

US dollar: outlook for Aug. 29 - Sep. 4

US dollar index made strong gains on Friday closing above July-August resistance line. US currency has potential to strengthen to 95.95 (May high) and 96.00. Support is in the 94.95 area.

Data confirmed that US GDP growth has slowed down in Q2 from 2.6% to 1.1%. However, the market’s attention was focused not on this figures, but on comments from the Federal Reserve’s members. The Fed’s Chair Janet Yellen said in Jackson Hole that the case for an interest rate hike has strengthened in recent months as the labor market and economy have improved. As a result, the expectations of the Fed’s rate hike rose from 21% to 33% for September and from 52% to 59% for December.    

Although Yellen gave no hints on the timing of any hike, but Fed Vice Chair Stanley Fischer claimed that Yellen's speech was consistent with expectations for possible interest rate increases this year. Fisher’s words became the main bullish driver for the greenback. Fisher also noted that August nonfarm payrolls report, due on Friday, September 2, will play a big role in the Fed’s decision. Other important events in the US economic calendar this week include CB consumer confidence on Tuesday, ADP employment report Chicago PMI and pending home sales on Wednesday and ISM manufacturing PMI on Thursday.  

All in all, the dynamics of the US dollar will be data-dependent. Members of the Federal Reserve are divided about a rate hike, to the market’s expectations of a rate hike may swing in either direction and have an impact on the currency. 

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