US consumer confidence
Yesterday, we saw US consumer confidence as measured by the Conference Board fall unexpectedly in September to 53.1, well below the 57.0 economists were expecting, as more consumers saw current business conditions as poor and jobs as hard to get. Consequently, the US stock market stumbled and the dollar rallied. This morning, the USD is sliding lower versus its major counter-currencies on increased risk-appetite due to a surge in Asian stocks overnight. This is merely more validation of how the USD is following movements in the global stock markets for risk-appetite cues. In order to predict the near-term direction that the dollar will take, one cannot deny that it would be most effective to gauge where the US stock markets may be going.
Let’s take a look at a few facts that are noteworthy for this analysis:
1. The most optimistic expectations are for continued US job losses at a slowing pace. Even for those still holding jobs, this puts downward pressure on wages. The US consumer is still getting poorer
2. US exports are down 25% from their June ’08 peak
3. Credit growth remains negative
4. Home sales continue to drop despite record low interest rates, deeply cut prices, and tax breaks for first time buyers
5. Business inventories continue to fall, you can start with Forex trading demo account to see what is it about.
6. Looming need to cut stimulus, raise interest rates
7. Yields are falling on US government bonds. This indicates investor risk-aversion.
All of the above points are potentially negative for the US stock markets and positive for the dollar.
The US ‘optimistic economic recovery’ theory
FOREX traders will get a few more pieces for this puzzle this week. This is a news- packed week for the greenback, starting with today’s crucial ADP Non-Farm Employment Change report, which is a big hint at Friday’s official and more important NFP reading, the most important US economic indicator. Look for indications of strength or weakness in the ‘optimistic economic recovery’ theory. Signs of weakness will boost the dollar and bust the stock market, and vice versa.
Fundamental Near-Term Outlook for US dollar: BULLISH
Tags: BULLISH, dollar, forex term, forex terms, Term Outlook for US dollar, US Outlook
