The US dollar recorded a new high year-to-date early Thursday morning before erasing all its early gains and finishing 22.5 points below the open. Contributing to this reversal was weaker than expected new home sales, down 50,000 from the prior reading. The selloff continued Friday morning, as new orders of durable goods decreased 2.1% vs a gain of 1.7% last month. In addition to weak home sales and durable goods numbers, the correction in equities is stirring rumors of a possible rate cut by the Fed later in the year. A rate cut weakens the dollar and forecasting one will drive investors away from the greenback and toward foreign currencies. As of Friday morning, resistance in the USD is observed at 98.03 while first support is seen at 97.46.
The Japanese Yen has gained momentum as the dollar appears to be in the topping process. From a technical perspective, the JPY hit resistance near its previous high around 91.84 and has formed a bull flag in a recent pullback, giving way to more bullish momentum again in the second half of this week. If the dollar continues to pull back, the yen looks to have more upside from safe-haven buying, in addition to last week’s Japanese GDP number being higher than expected. The British pound has seen a record number of consecutive down days over the previous 14 sessions, with slight support finally being found Friday morning. This comes on news that Prime Minister May will be stepping down in early June given her inability to formulate a working Brexit strategy. Should the new minister see more success in advancing the exit, bullish momentum could return to the pound. The euro continues its downward dance, with lower highs and lower lows over the last 4.5 months.
Japanese Yen Jun ’19 Daily Chart