The U.S. Dollar finished higher against a basket of major currencies last week for the first time since the week-ending June 19. Although the index did take out the previous week’s low, it quickly recovered from the move, rebounding enough to produce a slight weekly gain. The price action suggests a support base may be forming.
Last week, September U.S. Dollar Index futures settled at 93.412, up 0.091 or +0.10%.
After spiking higher on Monday following the previous session’s dramatic reversal to the upside, the greenback drifted lower for three days after the potentially bullish chart pattern failed to attract enough buyers to sustain the rally.
The selling was enough to drive the index to a new multi-year low on Thursday, but short-covering, profit-taking and some speculative buying, helped the greenback recover into the close in a move that carried over into Friday’s session.
As far as economic data is concerned, traders showed little reaction to a better-than-expected ISM Manufacturing PMI report that beat estimates 54.2 to 53.6 and an ISM Non-Manufacturing PMI report that came in at 58.1, above the 55.0 forecast.
Investors were rattled a bit on Wednesday when a report from ADP showed the non-farm employment change came in well below the 1200K forecast. Although the report is not a very accurate predictor of the Non-Farm Payrolls report per se, it did suggest a possible slowdown in the number of hirings in June.
This proved to be the correct assessment with the release on Friday of the U.S. Labor Department’s closely watched report showing non-farm payrolls increased 1.76 million in July, much lower than the record 4.8 million in June. Nonetheless, the figure still topped economists’ expectations.
Last week, investors also kept an eye on ongoing stimulus talks in Washington. As of Friday’s close, U.S. Republicans and Democrats had so far failed to reach an agreement on the cost of fiscal stimulus measures that many investors say is necessary to prevent the economy from losing more momentum.
Finally, speculators raised their net short dollar positions in the latest week, data on Friday showed. This may have prompted Morgan Stanley to say on Friday that the dollar is at its most oversold level in over 40 years. Further adding that it had now shifted from its dollar-bearish stance and turned “tactically neutral” on the U.S. currency.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire