On Thursday’s early trade, the dollar had fallen into a one-week low after the Federal Reserve kept interest rates on hold as its conclusion of its policy meeting yesterday. Consequently, the greenback further deteriorated against its rival currencies and plunged to a two-week low later in the day.
In addition to leaving rates unchanged, the US central bank also reduced the number of rate hikes it forecasts this 2016 from two to only one, and estimated a less hawkish increase in interest rates in 2017 and the following year. Still, the Fed hinted that it could tighten monetary policy before year-end if the labor market remains in its current improving status.
In that light, the Labor Department reported on Thursday the number of Americans filing for jobless benefits crashed to a two-month low in the week prior, a robust sign that job market is indeed in healthy condition. Initial unemployment claims lost 8,000 to 252,000, the lowest level since July. Analysts forecasted jobless claims to surge by 2,000 to 262,000 in the week prior.
This ongoing strength in the labor market may trigger the Fed to increase rates by December. As said in its conclusion on Wednesday, despite keeping rates on hold, the Fed said the case for a rate hike “has strengthened”, citing progresses in employment.
But not even Thursday’s release of upbeat US jobless claims data was able to trim the dollar’s losses as it went further downhill to hit a two-week trough. The US dollar Index hit 94.97, down 0.52%, the weakest level last seen on September 12. At this level, it is already a few points away from touching an almost three-week low.
As of 14:15 GMT, the dollar is still lingering in its two-week lows of 95.13, falling by 0.35%. While visibly, the candles and stochastic indicators are signaling a bearish trend for the dollar and the currency is further weighed by the fundamental factors, the trend line seems to indicate that the main trend is still strong.
(chart used from tradingview.com)
The three aligned candles as labeled with red arrows make up the trend line, and the last candle signals a strong upward trend with two consecutive bulls following it. Indeed though, despite the current declines of the dollar, the main trend still has an overall bullish view.
The current bearish candle opened right above the support level of 95.48 and eventually broke through with most of the candle’s body trading between the previous support-now-turned resistance level, and a new support level of 94.94. At this rate, it is unlikely that the dollar will recover and return to its original position yesterday. From here on, we expect the dollar to remain between resistance and support levels 95.48 and 94.94 respectively for tomorrow.
While shorter-term indicates that the bears will be in control, keep in mind that the main trend is still strong and may still push higher once the greenback has the slightest chance of recovery.
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