DailyFX Research: DXY Looking for a Lifeline as it Nears Crucial Support

Commentary, Forex, News, Technical Analysis
Talking Points:
– Gap between ‘hard’ and ‘soft’ US economic data proving to be a burden for US Dollar, US equity markets.
– With Gold and EUR/USD at resistance, the greenback needs to make a stand before momentum carries it away.
– Over two-thirds of traders are net-short EUR/USD, while 72% are net-long USD/JPY; neither positioning bodes well for the greenback in the short-term.
The end of the month is typically a quieter time for the economic calendar, although today is probably the busiest day of this week for the US Dollar with the US Advanced Goods Trade Balance figures and US Consumer Confidence due out. Market participants will have a close-up look at the divide between ‘hard’ and ‘soft’ economic data, and whether or not that dissonance persists.
Why does this matter? For the US Dollar, there is a rather underwhelming feeling coursing its way through the market right now: US economic activity isn’t strong enough to justify three rate hikes in 2017; and the lack of a coordinated fiscal policy rollout from the Trump administration will prevent the expected boom in US economic activity from being realized. The diminished prospect for fiscal stimulus means inflationary pressures won’t rise to the degree previously thought, so the Fed won’t be inclined to hike more than what’s priced into markets already.

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