The dollar lost ground

04.06.2019 09:37|Forex conotoxia.com

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The US currency significantly fell yesterday, given the recent standards of slightly lower volatility in the currency market. The dollar`s decline was intensified by macroeconomic data and statements by St. Louis Fed President James Bullard.

Yesterday's data on the manufacturing sector in the US disappointed, which may have already translated into USD weakening. In previous comments, we mentioned that the market may react quite enough to the deterioration of the economic situation in the US. The market previously behaved as if the possible slowdown did not affect the United States. The ISM manufacturing index fell in May to 52.1 pts from 52.8 in the previous month. The latest reading pointed to the weakest rate of expansion in the manufacturing sector since October 2016, as production growth fell to the weakest level since August 2016.

In turn, the US manufacturing PMI was adjusted down to 50.5 pts, which is much below the final result from the previous month (52.6 pts). The last reading indicated the weakest rate of expansion in the manufacturing sector since September 2009, as the production growth eased and new orders fell for the first time since August 2009.

Meanwhile, the Fed President from St. Louis James Bullard said that the US central bank may be forced to lower interest rates in the face of trade concerns. An additional argument for cutting interest rates is to be inflation below the FED target – Bullard added.

It seems that the above factors, overlapping each other, have led to a significant sell-off on the US dollar and may have triggered a more lasting trend. We have been observing the potential phase of distribution on futures contracts for the US dollar for about half a year, and the EUR/USD pair has been significantly oversold. Today in the morning EUR/USD increased to the highest level since mid-April.

 

Daniel Kostecki, Chief Analyst Conotoxia Ltd.

Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal Opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.

59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.


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