What's Driving USD?
If you were looking at Friday’s US economic data, the rally in the US Dollar understandably looks a little confusing. Both headline and core retail sales were seen dropping deeper than expected into negative territory last month, suggesting concerning times ahead for the US economy. However, it was the bumper performance in Q1 earnings from key banking names which captured traders’ attention.
JPM & Citi Beat Estimates
Both JP Morgan and Citi were seen posting stronger-than-forecast results for Q1. On the back of the recent banking sector troubles we’ve seen, the results have helped allay fears of a broader banking crisis developing with traders taking these initial results as an early sign that the Fed will likely have much more confidence in actioning a further rate hike next month. This view has been cemented in the shift we saw in pricing for the meeting with odds of a .25% hike having jumped around 20% on the back of those releases.
Big Names Due This Week
Looking ahead this week we have a slew of major names due to report including further banking icons such as Morgan Stanley and Goldman Sachs followed by major tech names such as Tesla and Netflix later in the week. If strong performance across Q1 continues to be seen, this should help drive down recession fears (for now at least), lifting hawkish Fed expectations and driving USD higher near-term.
Technical Views
DXY
For now, the Dollar Index is sitting on support at the 101.22 level following a brief test below the level last week. Given the bear channel framing the move from highs, the focus remains on downside risks and the potential for a move down to 99.46 should we break below the current support. To the topside, bulls need to get back above 103.48 to put focus back on a test of the 104.95 level.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.