Currency Analyst since 2010

US dollar: outlook for October 3-7

In line with our expectations decline of the US dollar after the Federal Reserve’s decision to keep rates unchanged in September was limited. US dollar index consolidated above 95.00 and even rose to 95.70 by the week’s end.

US election race continues. According to an NBC News/Survey Monkey poll, 52% of likely voters said that Democratic nominee Hillary Clinton “won" the first presidential debate, while 21% thought that the Republican Donald Trump was the winner. Clinton is perceived to be good for stocks and bearish for the greenback, while Trump, on the contrary, is associated with unpredictable policy steps, which should result in stronger USD. All in all, Trump is currently performing better than many political observers expected, so the overall uncertainty should continue.

As for American monetary policy, traders aren’t sure what will happen as well. Look how divided the market is now on the possibility of US rate hike in December: it’s almost 50-50 chance, according to CME data. The Fed’s Chair Janet Yellen said higher rate will likely be appropriate this year, but it’s clear that the regulator’s decision will depend on the incoming economic data.  

Economic figures from the US in the past week were mainly better-than-expected: Q2 GDP growth was revised up from 1.1% to 1.4% and durable goods orders didn’t decline in August as strongly as it was expected.

Next week America will release ISM manufacturing PMI on Monday, ADP non-farm employment change on Wednesday and unemployment claims on Thursday. On Friday expect increased volatility as the US will publish NFP (nonfarm payrolls) and other labor market figures. Also on Friday we’ll here from a bunch of Fed speakers – Fisher, Mester, George and Brainard. In addition, there will be more political news: Vice presidential debate will take place on Tuesday.  

Resistance for USD index is at 96.25 (late August and September highs). Support is at 95.00 (support line since May).

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