The USD moved lower on Monday, further extending the Dollar’s retreat that started in August. Further performance on all major currency pairs indicates a blatant deterioration. The USD has experienced a marked drop against most major currencies, including the euro, British pound, Canadian dollar, Australian dollar, New Zealand dollar and Swiss franc. As traders await the release of crucial Retail Sales data, the USD remains suspended in a bearish channel on the 4-hour chart, highlighting the uncertainty surrounding its near-term direction.
The climate of volatility we are experiencing today is a product of strained market expectations vs. real economic indicators. The US Dollar Index, which measures the currency’s strength against a basket of other currencies, has been fluctuating between 97.25 and 98.55. According to analysts, the USD will require a strong breakout from this channel. This step is critical for the currency to build real long-term momentum.
Current Performance of the US Dollar
On Monday, the USD was -0.26% change against itself, showing overall weakness in the dollar’s position. In more descriptive language, that meant it declined -0.34% vs the euro and -0.21% vs the British pound. The USD lost -0.24% to the CAD and -0.34% to the AUD. It dropped by 0.25% to the New Zealand dollar and weakened by 0.26% to the Swiss franc.
These numbers paint a picture of a larger bearish bias about the performance of the USD in the last few weeks. After signs of a resurgence in volatility and bullishness, traders have been spooked as they await several important economic releases. This uncertainty has left a cloud of sustained selling pressure over the currency.
The Impact of Retail Sales Data
Nevertheless, market participants will be exclusively awaiting the next Retail Sales numbers, which will be dropping in a few minutes. A much-better-than-expected report would mean consumer spending is more resilient than expected, pointing to a stronger-than-expected US economy. More data like this would help restore faith in the USD and even put a reversal of its recent downtrend back on the table.
Should Retail Sales numbers underperform expectations worse than projected, the USD may be in for a wave of renewed short-term bearish pressure. This level of uncertainty underscores the significance of the upcoming data release. It would have tangible effects on the FOMC’s monetary policy discussion, which is slated to take place later this year.
Future Outlook for the US Dollar
Considering the condition of the USD and the major economic indicators set to be released soon, analysts are urging high levels of prudence. 4-hour market chart 4-hour bearish channel. A major breakout from the current trading range area is needed for any meaningful recovery. Until that breakout comes, traders are a bit doubtful of the USD’s potential to gain significant strength.
Moreover, the stage of monetary policy uncertainty sets additional complication to overall market dynamics. Economic uncertainty is related to the Federal Reserve’s and other central banks’ struggle against inflationary pressures. Their decisions will have the widest impact on currency movements.