The US economic calendar for this week is filled with a lot of data that will exert strong effects on the US dollar. The two Fed meetings this week is expected to be hawkish further strengthening the US dollar. And with the German elections coming up this week on 26th September, investors and more likely to convert their store of wealth to US dollar while awaiting the outcome of the elections. A strong positive movement is therefore expected of dollar this week while a further decline is expected for the precious metal gold.
Analysis and Forecast for US dollar: Great volatility expected.
The US Dollar Index had gained +0.66% last week on the back of rising Fed rate hike odds. Virtually all pairs with dollar as the base currency pair had witnessed a positive movement while other pairs with dollar as the counter pair fell drastically. This is a clear evidence of a resurging dollar strength once more. However, this week has a lot of Economic activities on the US weekly Calendar that will impact greatly on the US dollar. These activities and their expected impacts include:
· Monday, September 20, the September US NAHB housing market index will be released. A Bullish impact is expected from this.
· On Tuesday, September 21, August US building permits and August US housing starts data are due. A neutral impact is expected.
· On Wednesday, September 22, weekly US MBA mortgage applications and August US existing home sales will be released in the morning, while the September Fed meeting and press conference by Fed Chair Jerome Powell will take place in the afternoon. A negative impact is expected.
· On Thursday, September 23, the August US Chicago Fed national activity index, weekly jobless claims figures, the September US Market manufacturing PMI (flash), and August US CB leading index are all due. A positive impact is expected.
· On Friday, September 24, the August US new home sales report will be released and Fed Chair Powell will deliver a speech. A positive impact is expected here.
· Above all, the upcoming German elections this week on Sunday 26th September is expected to favor dollar all the more while weakening EURO. This is because judging from the fear driven market sentiments, investors are more likely to convert their investment in Euro and pounds into dollar while awaiting the outcome of the elections.
Still more, according to popular analysts, while Federal rate hike expectations were largely unmoved after the July FOMC minutes – which clearly stated that there were no current intentions of tapering nor increasing the interest rates, on contrary, the US yield curve is presently moving in a manner that suggests a more hawkish Fed is here for us this week, possibly an increase in interest rate might be one of the possible outcomes of the two Fed meetings to be held on 22nd and 23rd of September respectively; which is a good thing for the dollar strength. Hence, an overall positive movement and strong volatility for US dollar is expected this new week.
Forecast for Gold: BEARS still to Dominate this week.
Gold is currently on a strong downward trend following the recovery in dollar index. The major determinant factor for Gold this week is the Fed reserve meetings. Since we anticipate a hawkish attitude towards interest rate for US dollar, we expect Gold to fall all the more, to the next support at $1719.00. We can only expect a recovery from Gold at this point. The overall sentiment for Gold currently is bearish.
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