US Dollar Moves To Support Ahead Of Heavy Dose Of Data

As we close the books on May, one of the most aggressive themes of the month is in the spotlight as we near a bevy of data releases. The US Dollar has become a major focal point across markets as traders and investors have been factoring in expectations around US rate policy for the coming months. And as we entered the month of May, the odds of getting a hike in June dropped dramatically after an abysmal Non-Farm Payrolls report. But throughout the month we received near-constant hints from Fed members that a rate hike in June is not completely off the table; with the April FOMC Meeting minutes going so far as to say that the bank felt that markets were underpricing the probability of a hike in June.

That next FOMC meeting is two weeks away, but fully expect this topic to take center stage in markets as traders look for clues and hints in the outsized amount of data that will be delivered this week; with particular interest cast around US data on Tuesday (Consumer Confidence), Wednesday (ISM Manufacturing) and Friday (Non-Farm Payrolls for the month of May). Also potentially relevant to US Dollar trends is the European Central Bank meeting on Thursday morning. No action is expected at that meeting as the bank will likely still be evaluating data after the large increase to stimulus made very recently; but commentary on the global economy or signs of growth or initial signs of economic stability in Europe can all be seen as risk positive, which could bring on additional US Dollar strength.

As we enter this labyrinth of data prints, The US Dollar is finding support at a zone of old resistance. The Fibonacci retracement that we’ve been discussing using the prior major move of last April’s high to last May’s low has produced numerous usable levels for traders. The current level of interest on the Dow Jones FXCM Dollar Index is at 11,960, which is the 61.8% retracement of that prior major move. We first looked at this level two weeks ago as USD ran into this level as resistance. The next few days in the Greenback produced a rather consistent range as this level of resistance was able to stymie the buying demand that had throttled USD higher. And after a quick break of that short-term support, the US Dollar began to throttle higher, and this made risk trends in pairs like the Euro really stand out as major support levels gave way to a strong Greenback.