Title: U.S. Dollar Rebounds on Strong Consumer Sentiment Data: A Detailed Analysis on Major Currency Pairs
Source: Originally reported by James Hyerczyk, FX Empire
The U.S. dollar staged a strong rebound from earlier session lows on June 14, 2024, as the latest University of Michigan Consumer Sentiment Index beat expectations. The surprise upside in the sentiment report provided a significant boost to the greenback, reversing prior downside pressure driven by recent soft inflation data and shifting monetary policy expectations. This article provides a comprehensive analysis of how the dollar responded to this economic release and what it means for key currency pairs including EUR/USD, GBP/USD, USD/CAD, and USD/JPY.
Key Highlights
– The University of Michigan Consumer Sentiment Index for June came in at 65.6, handily beating the forecast of 62.0.
– Inflation expectations for the year ahead fell to 3.3 percent from 3.4 percent, while five-year expectations declined to 3.0 percent from 3.1 percent.
– The rebound in consumer sentiment helped offset dovish interpretations of recent U.S. CPI data and Fed statements.
– Major currency pairs saw notable intraday reversals in price movement, reflecting renewed dollar strength.
Market Background: The Fed, Inflation, and Policy Expectations
Before diving into the technical outlook for major currency pairs, it is essential to understand the broader market context surrounding these moves. The recent U.S. Consumer Price Index (CPI) showed a modest cooling in inflation, prompting traders to price in the possibility of rate cuts from the Federal Reserve later this year. However, the Fed’s latest policy meeting on June 12 surprised markets by adopting a more hawkish stance than expected, forecasting one rate cut instead of two for 2024.
Even so, market participants perceived dovish undertones in Fed Chair Jerome Powell’s comments, resulting in a weakening U.S. dollar post-FOMC. Against this backdrop, the upbeat Michigan sentiment report helped the dollar regain lost ground, suggesting underlying resilience in consumer spending.
Detailed Currency Pair Analysis
EUR/USD: Slips Below 1.0700 After Rallying Early in Session
The euro initially climbed during the June 14 session, extending its weekly gains amid dollar weakness following tame inflation data. However, the upbeat U.S. sentiment report triggered a turnaround, pulling the pair back below key technical levels.
– Intraday Performance: EUR/USD traded as high as 1.0760 before falling to around 1.0680 in New York trade.
– Technical Outlook: The pair closed below the 200-day moving average, a potential bearish signal.
– Resistance: Near 1.0765 (weekly high), followed by 1.0800.
– Support: Key short-term support resides at 1.0660 and 1.0610.
The euro’s near-term trajectory may hinge on upcoming eurozone data and U.S. releases, but strong consumer sentiment and firm rate expectations in the U.S. create challenges for further EUR upside.
GBP/USD: Pound Pulls Back as Dollar Recovers Strength
The British pound reached a fresh multi-week high earlier in the session, propelled by strong UK GDP data and a softer dollar. However, the tide turned with the improved U.S. sentiment figure, pushing GBP/USD into negative territory by the end of the day.
– Intraday Performance: The pair touched 1.2850 before slipping to the 1.2700 area.
– Key Drivers: UK’s stronger-than-expected GDP (+0.7% Q/Q) initially supported the pound, although its impact waned amid dollar resurgence.
– Resistance: 1.2850 and 1.2895 remain key resistance points.
– Support: 1.2660 and 1.2600 offer near-term support.
The Bank of England is set to meet next week, and while no rate change is expected, forward guidance could affect
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