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U.S. dollar posts second week of gains ahead of Fed meeting

The U.S. dollar on Friday notched a second week of gains after a volatile few days when currencies moved with shifting risk appetite, with the market’s focus now on next week’s Federal Reserve meeting.

Some analysts wondered, though, whether the dollar’s recent rally may be losing momentum.

The dollar index , which measures the greenback against a basket of six major currencies, was slightly higher on the day at 92.894. For the week, it was up 0.1%, after rising 0.6% previously.

But that was off a 3-1/2-month high of 93.194 hit on Wednesday, bolstered by strong Wall Street earnings that helped investors regain some confidence in the midst of worries that the Delta coronavirus variant could derail the global recovery.

“Medium-term oscillators and momentum are in sync on the upside suggesting potential higher highs to come, such as 94.30-94.72 (on the dollar index),” said Dave Rosenberg, chief economist and strategist, at Rosenberg Research.

He also cited the potential of a “Golden Cross” in the dollar index, a chart pattern in which the 50-day moving average crosses above the 200-day moving average, a bullish signal.

“Overall, the dollar(index) leans toward further upside which could add to recent pressure in commodity prices and other currencies. Support is at 92.00-91.50,” said Rosenberg.

So far in July, the dollar has gained 0.6%, after rising 2.8% in June.

Investors’ next major focus is the Fed’s two-day policy meeting next week. Since the June 16 meeting, when Fed officials dropped a reference to the coronavirus as a weight on the economy, cases have risen.

Many economists still expect the meeting to advance discussions for a tapering of stimulus.

The euro was flat at $1.1770, showing little reaction to the purchasing manager surveys coming out of France, Germany and the euro zone as a whole.

Euro zone business activity expanded at its fastest monthly pace in over two decades in July as the loosening of more COVID-19 restrictions gave a boost to services, but fears of another wave of infections hit business confidence.

 

Reference: Reuters