US dollar: outlook for May 1-5
The US dollar opened the week with a bearish gap formed on the first round of French presidential election.
Donald Trump has lived through the first 100 years of presidency. His tax plan has disappointed investors with its lack of details. In addition, the markets are skeptical that any comprehensive tax changes will be approved by the Congress. Canadian dollar and Mexican peso strengthened versus their US counterpart on the news that the United States doesn’t immediately plan to withdraw from the North American Free Trade Agreement. As for the geopolitical tensions, Trump said that a major conflict with North Korea is possible, but he would prefer a diplomatic outcome to the dispute. There may be more headlines on this topic in future. In the meantime, US GDP growth has slowed down to 0.7% in the first quarter.
American economic calendar is packed with important events. On Monday, we’ll hear from Treasury Secretary Steven Mnuchin. The US will release core PCE price index, which is the Fed’s preferred inflation indicator, as well as ISM manufacturing PMI. On Wednesday don’t miss ADP non-farm employment change and ISM services PMI. In addition, there will be a meeting of the Federal Reserve. The press conference is not scheduled and the market is not expecting a rate hike. On Thursday, the US will release unemployment claims, trade balance, and factory orders. Then there will be the first Friday of the month, which is usually volatile because of NFP release.
The US dollar index held above the 50-week MA at 98.45, but is now below the former support line from 2016 lows and below 200-day MA. Return above 99.30 is needed for the bulls to return. The next stops will likely be 100.00 and 100.45. Otherwise, bearish pressure will intensify with the greenback remaining vulnerable for a decline to 97.55 (100-week MA, July 2016 highs).
