The dollar rebounds ahead of Fed meeting

The green currency rebounded against a basket of major after last week losses ahead of the Fed meeting tomorrow. The dollar index, which tracks the dollar movements against six major currencies, climbed to 80.62 after receiving support at 80.09.

Yet, the dollar remains under pressure and expectations that it will continue its drop are ongoing after a wave of concerning data released recently, especially Friday's non-farm payrolls which showed a drop of 131,000 in July from 71,000 in June.
The fraught outlook is increasing speculations the Fed would keep interest rate at its current low level and continue bond buying.
On the other hand, the euro failed to continue its surge after rebounding more than 11% since touching June's drought of $1.1874, yet it remains near three-month high against the dollar.
Concerning the euro-dollar pair, it reversed down to 1.3244 after hitting a high of 1.3307 where it found strong support at 1.3200 levels, while it recorded a low of 1.3226. For the rest of the day, the pair is expected to move between support and resistance at 1.2195 and 1.3325 respectively.
An upbeat German trade balance report released earlier today failed to boost the euro to continue its rally, yet it confirms the strength of recovery in the euro area following the strong second-quarter data and optimistic announcements by Trichet last week.
Moving to the sterling-dollar pair, it is showing slight decline on the daily and 4- hour basis in the absence of economic data from the UK today ahead of the release of inflation report later on this week. The pair is also predicted to stop its rally after the sterling has surged to above 5-month high against the U.S. dollar to trade in an overbought area as noted by momentum indicators.
Currently, the pair is trading at 1.5935 after recording a high of 1.5993 and a low of 1.5929, while it is expected to move between support at 1.5865 and resistance at 1.6025 for the rest of the day.
With regard to the dollar-yen pair, it is showing incline today as the rally in stocks damped demand on the yen as a refuge, yet the dollar remains hovering near 15-year low against the Japanese currency.
So far, the pair is trading at 85.65, reporting a high of 85.76 and a low of 85.28, whereas support is seen at 85.00 while resistance is at 86.35.

Home Sales Miss, Eyes on Jobs

The greenback traded on weaker footing against the major currencies in the Tuesday session, sliding by 0.8% versus the Japanese yen and losing around 0.4% against both the euro and the British pound. Crude oil managed to extend gains further, trading up by 1.3% to settle near $82.40-per barrel – its highest level since May 13th. Meanwhile, the US equity bourses closed marginally lower with the Dow Jones and S&P 500 shedding around 0.4% and the Nasdaq declining by 0.5%. Wall Street stalled on the heels of soft earnings reports from Proctor & Gamble and Dow Chemical.

The US economic reports were largely weaker than expected on the session. Garnering the lion’s share of market attention was the pending home sales report, which was initially estimated to improve by 4.0% in June, reversing the record 30% plunge from May. Instead, the headline figure posted a decline of 2.6% versus a marginal upward revision of 29.9% from the prior month. On a yearly basis, pending home sales fell by 20.1% in June compared with a 15.6% drop from the previous year. Both personal spending and income were softer than forecast and flat for the month of June. Rounding out today’s reports was the June core PCE, which edged up slightly on a yearly basis at 1.4% and flat on a monthly basis.

The disappointing housing report weighed on the markets and shifts the focus to the jobs data due out over the rest of the week. Wednesday will see the July Challenger job cuts report, followed shortly by the ADP private-sector payrolls. The ADP report is expected to reveal jobs creation of 33k in July for the private sector versus 13k jobs added in June. Also to be closely watched will be the non-manufacturing ISM report, forecast to slip to 53.0 in July compared with 53.8 in the previous month. The employment index will also be analyzed following the dip in the previous reading to below the key 50-level.

Markets Softer On Poor Data, Fed- Yen Advances

Asia Pacific markets were mixed after US equities slumped on disappointing economic data and talks of further quantitative easing measures from the Fed. Weaker than expected personal spending, factory orders, pending home sales, and consumer confidence reports, confirmed fears that the pace of the US recovery is slowing. The Hang Seng index and the Shanghai SE composite posted gains of 0.6% and 0.4% respectively, while the S&P/ASX 200 index slid 0.7%. The Nikkei 225 was the worst performer, falling more than 2.1% as concerns regarding the health of the US economy and persistent strength in the yen pressured stocks. Japanese exporters were pummeled as the nation's currency advanced to an eight-month high against the greenback at 85.34. The yen remains in demand amid relatively elevated risk aversion levels, with bond yields softer across the board. Yields on the US 2-year note fell to record lows on mounting speculation that the Federal Reserve may resume treasury purchases in an attempt to revive the faltering recovery. We note a strengthening correlation between the spread on 2-year US and JGB bonds, and the USD/JPY pair. The yen will approach a 15-year low at 84.82, with downside risk increasing below.

Euro Pares Losses Ahead of ECB- Dollar Retreats

Market sentiment improved overnight with US equity bourses higher across the board on better than expected employment and ISM non-manufacturing data. July ADP employment posted a gain of 42k, beating estimates for a reading of 30k, while ISM printed at 54.3, up from 53.8 a month prior. The news eased nervous investors after a flurry of disappointing data on Tuesday triggered a sell-off in equities, with the dollar index slumping to its lowest level in nearly four months. The Dow, the S&P, and the Nasdaq were higher by 0.4%, 0.6%, and 0.9% respectively. Asia Pacific markets were mostly firmer with the Nikkei 225 gaining more than 1.7% on better than expected earnings reports and positive data out of the US. The S&P/ASX 200 index was also higher by 0.5% after Australia posted its highest trade surplus on record on Wednesday. Treasury yields came off record lows, while the yen retreated from an eight-month high against the greenback on improving risk appetite. Investors remain cautious however, ahead of tomorrow's jobs report out of the US.

USD Slips

The dollar fell further against the majors in Thursday trading, sliding most against the Swiss franc and Japanese yen by about 0.6%. The Dow Jones and S&P 500 were marginally lower on the session while the Nasdaq fell by almost 0.5%. Crude oil slide by 0.5% to just above the $82-per barrel mark while spot gold was little changed on the session, holding steady around the $1,195-mark.