The US dollar snapped two week losing streak on Friday after Fed Chair Janet Yellen said the case for a rate hike is getting stronger. This was after data showed durable goods ordered in July jumped 4.4 percent from previously declining 3.9 percent in June and that new home sales rose 654,000 from 582,000 recorded in the preceding month, while preliminary GDP climbed 1.1 percent as predicted by economists.
All these fundamental couple with continuous improvement from both the labor market and consumer spending will form the basis for rate decision in the remaining half of the year. Nevertheless, I don’t see this happening this September because of slow productivity and high global savings, which will likely limit capital inflow needed to complement high cost of servicing loans and bank rolling capital projects needed to sustain earnings, consumer spending etc. Hence, this current bullish view might be short lived.
However, there is an opportunity for EURUSD sellers this week. Since July 2nd when I first mentioned this pair here. It has repeatedly failed to cross the ascending channel started in March this year. Last week, the pair closed below 1.1233 support, and opened this week below 20-day moving average. This for me, partially confirmed the impending bearish move, but my final confirmation was the statement of the Bank of Japan Governor, Haruhiko Kuroda, that the institution is ready to approve more quantitative easing or even lower negative interest rates without hesitation, this I believe will hurt the attractiveness of the yen as a safe haven and increase the demand for the greenback henceforth.
Therefore, I remain bearish on EURUSD with 1.0821 as the target.