Currency Analyst since 2010

US dollar: outlook for September 12-18

US ISM services PMI showed dramatic decline of 4.1 points in August falling to 6-month low. This together with disappointing nonfarm payrolls and contraction in manufacturing hurt positions of the US dollar bulls. By the end of the week, however, American currency managed to recover.

The odds of the Federal Reserve’s rate hike in September remain low, but its probability rose, according to CME futures tool, from 15% at the beginning of the week to 24% at its end. Market players are still unsure and ready to change their expectations. That’s why attention to the forthcoming American data releases will be high.

The US will release a big block of economic statistics on Thursday: retail sales, producer prices, Philly Fed manufacturing index, unemployment claims, current account, Empire State manufacturing index and industrial production. In addition, don’t miss the speech of FOMC member Lael Brainard on Monday: there’s speculation that she may deliver some hawkish comments that will be positive for the US dollar. Still, the greenback’s ability to strengthen on hawkish hints from the Fed should be limited: although some members of the central bank clearly try to keep the expectations of September rate hike alive, after the recent weaker economic figures the market won’t attach much importance to these attempts.

Analysts at Sociate Generale point out that despite weaker data from the United States Forex market doesn’t offer good alternatives to USD. Yields in the euro area and Japan are negative. The highest yields are currently offered by the New Zealand, but NZD has already strongly appreciated during the recent month.  

The downside of the US dollar index was limited by the support line from May lows in 94.50 area. Resistance is located at 96.15 – resistance line connecting August highs. 

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