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The USD lost over 100 points in trading yesterday against the Euro. The pair ultimately closed at 1.5665. Except gaining vs. the JPY, the US dollar lost versus the rest of the major currencies yesterday. A possible explanation for this general deprecation of the greenback can be found in yesterday’s news events. The FOMC Statement was less hawkish than expected after the Fed decided to leave interest rates unchanged at 2.00%. To demonstrate this, here is an example of assertions that were made during the FOMC Statement by the Fed: “uncertainty about the inflation outlook remains high” and “the upside risks to inflation and inflation expectations have increased”. The balance of risks is shifting and the USD will continue to be under pressure for as long as the “inflation situation” remains unclear.

Yesterday’s fundamental data came out with mixed results bringing no relief for the US dollar. The Core Durable Goods Orders and Durable Goods Orders came in as forecasted at -0.9% and 0.0% respectively. Though the Durable Goods Orders demonstrated a rising trend, the more essential Core Durable Goods Orders displayed a declining trend. On the other hand, the Crude Oil Inventories grew from -1.2m to 0.8m. The closing event of the day was the Federal Funds Rate which, as explained above, remained unchanged at 2.00%.

Today should be calmer than yesterday as fewer affecting events on the greenback will be published. The final GDP should rise by 0.1%. The Unemployment Claims should shrink by 6k. The vital Existing Home Sales indicator might rise by 0.7M. The Natural Gas Storage is expected to be released as well. On the whole, the USD should be on the rise as it is implied by the impending indicators of the day.

Today, investors might need to be ready to take the opposite position from yesterday. The reason for this is the new direction that can be derived from the indicators. Thus going long on the USD could be a good strategy today.

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Yesterday, the USD lost grounds against most of its rival currencies but remained within its recent range. The recent USD weakness has been caused by some traders’ renewed expectations for higher U.S. interest rates after contradictory U.S. economic data. The greenback continues with bearish momentum following Tuesday’s losses, which resulted by the Housing Starts’ plunge to its lowest level in the last 17 years added by the adverse economic information from mortgage and lending markets. The USD was 0.1% lower against the JPY, trading at 107.80, and also depreciated to 1.5528 compared with 1.5462 against the Euro.
Also yesterday, the Crude Oil prices climbed up, passing the $136 following an imminent strike trend in Nigeria. Crude Oil prices moved up in anticipation of the supply data from the U.S, which showed a decrease in stockpiles by 1242k barrels in the week ending on June 13.
On tap today, we are expecting a batch of mixed U.S. data. Unemployment Claims is expected to rebound back to 375K, the Philadelphia Fed will release its Manufacturing Index for June which is expected to hike to -10 compared with May’s reading of -15.6. We also expect hawkish speeches from the Treasury Secretary Paulson and the Fed’s Vice-Chairman Donald Kohn about risk management and its implications for systemic risk. As most indicators are expected to have a rising trend, this should give the greenback a recovery from the previous trading days during today’s trading session.

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