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US Data Poses No Threat to the Dollar

Last updated 5/10/2012 9:30 AM ET (GMT -5) 0 Comments - Add your comment

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Kathy Lien

Director of Currency Research, GFT

After eight straight days of weakness, the EUR/USD is finally getting some relief. Risk appetite stabilized overnight, helping to lift currencies such as the euro up against the dollar. No news was good news this morning for Greece with the baton now set to be passed to Pasok leader Venizelos who will take a shot at forming a coalition government.  Like Samaras and Tsipras he is expected to fail, leaving elections in June as their only option. Until the June elections are held, it may be smarter to sell than buy rallies in the euro.

Meanwhile we finally have some U.S. data on the calendar. This morning's reports were mildly negative for the U.S. dollar with trade balance widening significantly from -$45.4B to -$51.8B in March.  Exports rose 2.9 percent while imports increased 5.2 percent. Trade activity in the first quarter is now expected drag GDP growth lower because of the sharp deterioration from Q4.  Thankfully manufacturing activity rebounded in April which suggests that the next trade balance report could show a smaller deficit.  More importantly, jobless claims dropped from 368k to 367k.  Although the prior report was revised slightly higher, the absolute level of claims is consistent with an improvement in the labor market.  In other words, the jobless claims figures were neither good nor bad but low enough to prevent USD bulls from going into panic mode. If jobless claims ticked back above 380k, we would expect payroll growth to weaken further in May but there is nothing to worry about in today's numbers.  The 4 week moving average also dropped to 379k from 384k while continuing claims dropped to its lowest level since summer of 2008.  Finally import prices fell 0.5 percent last month.  With inflationary pressures softening, Federal Reserve officials will have no problems with maintaining their dovish tone.

Fed Chairman Ben Bernanke will be speaking at 9:30am ET /  13:30 GMT.  The topic is bank capital but these days, you never know when a central bank official will use scheduled speeches as an opportunity to touch on monetary policy. 

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About The Author

Kathy Lien began her FX trading career 10 years ago at J.P. Morgan Chase. After graduating New York University’s Leonard Stern School of Business at the age of 18, Kathy joined the bank's interbank FX trading desk and eventually moved to the cross markets proprietary trading desk. In the interbank market, her ability to create solid fundamental and technical analysis from the myriad of information on the market helped her trade forex spot and options. Her experience eventually led her to be chief strategist at Daily FX where she worked until she joined GFT in 2008.

With her knowledge of forex, as well as her experience trading other products, such as interest rate derivates, bonds, equities, and futures, Lien has built a reputation as an international currency analyst. She is frequently quoted on CNBC, Bloomberg, Fox Business and Reuters. Lien has also written for publications like Active Trader, Futures, and SFO magazine. She is the author of the newly updated Day Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Boris Schlossberg.

To buy Kathy’s newly updated Day Trading and Swing Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, click here.