US Dollar Falls, But Finds Trendline Support – Breakout Potential Next Week?

The US dollar ended the day mostly lower, gaining only against the Canadian dollar, as the currency remains in consolidation mode versus most of the majors. Looking to the DXY index, we see that the greenback has ended the week virtually unchanged as this morning’s plunge was ultimately supported by a rising trendline near 80 connecting the June 3 and June 11 lows. With resistance looming just above at 81.35, this period of tight range-bound trade leaves the currency susceptible to breakouts next week, especially since there will be quite a bit of event risk on hand from the US.

On Tuesday, the National Association of Realtors (NAR) is anticipated to report that existing home sales rose for the second straight month at a rate of 2.6 percent in May to an annual pace of 4.80 million from 4.68 million. While not always a reliable leading indicator, there are encouraging signs that existing home sales could improve in line with expectations, as the Commerce Department reported on June 16 that housing starts and building permits jumped from their record lows during May. On Wednesday morning, US durable goods orders are projected to show a 0.8 percent decline in May following a 1.9 percent jump in April, and excluding transportation the index is forecasted to fall 0.5 percent. Later in the day at 14:15 ET, the Federal Open Market Committee (FOMC) is widely expected to leave the fed funds target range at 0.0 percent - 0.25 percent, and this should remain the case throughout much of the year. On Thursday, the third and final reading of US Q1 GDP is not expected to be revised from previous estimates of -5.7 percent, and thus, may not be too market-moving. Finally, on Friday, personal income and personal spending results for the month of May are anticipated to yield improvements, but traders should be skeptical of the income result: past increases have been purely the result of rising transfer payments, which include retirement, disability, and employment insurance, while wage and salary compensation has either fallen or stagnated since September 2008.

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