Reply #4: dollar watch

[UpInArms]

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Last trade 81.609 Change 0.001 (-0.00%)

Dollar Stalls In Dangerous Territory

http://www.dailyfx.com/story/currency/eur_news/Dollar_Stalls_In_Dangerous_Territory_1176916438623.html

The fundamental calendar has left the US dollar to drift against the revived currencies of the G10. With only second and third tier indicators filling out the coffers for the rest of the week, greenback bulls will have to position off of unforeseen events or cross currency data to generate momentum – a risky proposition since many of the majors are testing big levels.

For EURUSD, that level is the 1.3670 high put in back in the December of 2004. Spot continued its slow approach of this level, but price action on the quiet day today kept things in a 60-point range below 1.3620. Dollar weakness translated to a new four month low against the Swiss franc, a distinction won when USDCHF dropped quickly below 1.2030. After the big rally Tuesday that pushed GPBUSD above 2.0, bulls looked to push the pair the last few steps beyond 2.01 and in turn make history with a new 26-year high. Finally, even the carry trade, the last bastion of dollar buying, lost its appeal as USDJPY lost another 80 points to bring the two day total to 180 points.

From the economic calendar, the only noteworthy indicator available was the Mortgage Bankers Association’s weekly applications data. According to the group’s numbers, total applications fell 2.5 percent through the period ending April 13th. Including today’s number, mortgage filings have fallen five weeks in a row. The last time, the MBA’s data has shown such a consistent downtrend was in May and June of 2004. Adding to the concern, the less-volatile four-week average for the applications index dropped to 406.1, only slightly above the average for the fourth quarter of 2006. Any way this indicator is cut, it offers little support for the weakened housing sector. And, in compared to the monthly sales and construction gauges that draw so much attention, the weekly applications reports are far more prescient. Not only are the numbers more timely, but the mortgage process is upstream to building and sales. If home loan applications continue to slide due to increased regulations and requirements following the sub-prime upset, then the broad housing sector may revive its declines.

Looking ahead to tomorrow, there are releases that will generate interest on their behalf. The morning will begin with the first-time jobless claims for the last week. Economists expect claims to dip 22,000 to 320,000, though such an improvement wouldn’t fundamentally change payroll numbers. However, after the better than expected print in March NFPs, any bullish employment data would help to build generous speculation for April’s figure. A little later, the Philly Fed factory survey will mark the fundamental highlight of the day. The manufacturing sector has flirted with recessionary readings in the past few months; and any sign of improvement or deterioration could clear the market’s outlook for the nationwide ISM release. What’s more, after the small change in the Empire activity report, a surprise showing in the Philly number could pick up volatility on an otherwise quiet session.

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US Dollar Continues to Weaken, Hitting 20 Yr Lows Against British Pound and New Zealand Dollar

http://www.dailyfx.com/story/dailyfx_reports/daily_fundamentals/US_Dollar_Continues_to_Weaken__1176932580439.html

US Dollar- With no significant data on the US calendar, there is nothing preventing traders from selling US dollars. In fact, the dollar hit fresh 26 year lows against the British pound, 24 year lows against the New Zealand dollar and 2.5 year lows against the Euro before recovering. The recovery however was shallow as the EUR/USD, GBP/USD and NZD/USD all ended up back in positive territory. This is not a reflection of the market’s distaste for the US dollar or their pessimism about the outlook for the US economy. Instead, it is a reflection of the market’s voracious appetite for yield. Currency traders refuse to give up on carry trades and the major intraday reversals in USD/JPY and NZD/JPY are evidence of that. It is probably not a coincidence that the Dow Jones Industrial Average also hit an all-time high today. The weakness in the US dollar is helping to make US stocks a good value for foreign investors. We expect the Treasury’s reports on net foreign purchases of US securities to be strong in the next few months as the demand for both US stocks and bonds remain robust. Looking ahead we are expecting leading indicators, jobless claims and the Philly Fed report. The rise in the stock market should help to boost leading indicators while jobless claims are predicted to have dropped last week after the prior week’s sharp surge. This makes the Philly Fed survey the event risk for the day. Even though the Empire State manufacturing survey rebounded far less than expected, the forecasts for the rebound in the Philly Fed survey is already very modest, which means that it may not be hard for the data to surprise to the upside. The more important question to ask however is whether this will matter. There is no doubt that the US dollar is oversold, but the only turn that will probably see is in USD/JPY and not in the EUR/USD or GBP/USD.

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