Dollar bears optimistic despite disappointing jobs data
Dollar bears, singed by the currency’s biggest rally since January, say they’re still holding their ground.
Bloomberg’s dollar index surged as much as 0.8 per cent on Friday on a government report showing that the US added 209,000 jobs in July, beating the consensus prediction of 180,000.
The data highlighted the strength of the world’s biggest economy and sparked a surprising reversal for the greenback, which sat close to a 15-month low ahead of Friday’s report.
The end result, though, is that the dollar is merely back to around where it started the week against the euro, which held above a key technical level that it breached last week for the first time since August 2015. The dollar-bear camp can also take cheer in one observation: Expectations for the pace of Federal Reserve tightening barely budged on the report.
“It is more of a story of providing underlying dollar support at key levels rather than a fullon reversal,” said Alan Ruskin, the global co-head of foreign exchange research at Deutsche Bank. “Unfortunately for the dollar, the ideal dollar scenario needs a significant change in Fed expectations.”
The dollar ended Friday at US$1.1773 per euro, about 0.2 per cent weaker on the week. Europe’s shared currency bottomed out Friday just above the $1.1714 level it exceeded last week for the first time in almost two years. A lower level, at $1.1616, will also provide support, Ruskin said.
For some chart-watchers, the dollar’s snapback came as no surprise. Technical indicators had suggested the greenback was due for a reversal. As of the end of trading on Thursday, the dollar index’s relative strength index showed the greenback was oversold on a daily and weekly basis, with the latter’s reading the lowest since 2007. It remains stretched on a weekly perspective.