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US Dollar Continues Dipping On Fed’s Reinforced Dovishness -

May, 02nd 14:59

EU factories performed better in April as output fell less than expected. The Markit Manufacturing Purchasing Managers Index (PMI) released today showed strong growth in Italy (53.9) and Spain (53.5). Activity in Germany has also shown signs of revival, but in France, the index dipped to the lowest level of the year at 48.0.

The PMI for the Euro zone increased to 51.7 from 51.6 in March, up slightly compared with the forecast of 51.5, indicating an industrial expansion.

The dollar continued its down-move as the Fed’s dovish tone on another rate hike this year has been reinforced, due to negative signals from the US economy in specific and the global economy in general. The US manufacturing PMI is expected to come in at 51.6 in April, down from 51.8 in March. The index summarizes how purchasing managers’ rate business conditions including employment, production, new orders, prices, supplier deliveries, and inventories.

According to a survey on Sunday, the Chinese manufacturing sector has witnessed 2 consecutive months of expansion up to April. However, the rise is just marginal, making investors concerned about the sustainability of recent positive data from the world’s second largest economy. The uncertainty about global economic conditions has pushed investor to rush towards safe-haven assets like The Japanese Yen and Gold, pushing the greenback to hit the lowest level of the year against the Euro.

The dollar index, which measures the strength of the US dollar against six major currencies, has dropped to its lowest level in 8 months on Monday.

EURUSD

Fig. EURUSD D1 Technical Chart

The Euro has hit the highest level of the year against the US dollar at 1.14938. The pair EURUSD will soon hit the overbought zone as seen with the RSI heading up to around level 67. The green arrow on the SAR has appeared since March 15, indicating a continuing uptrend in the price. The price is expected to continue going up further with a buying position encouraged.

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