Dollar Strengthens Following US PPI and Jobless Claims

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After a stronger-than-expected PPI, the dollar is attempting to reclaim some ground during the US session. Initial and ongoing jobless claims were also on the decline. The dollar is followed by the Euro and the Yen, with the Australian and New Zealand currencies being the softest. For the time being, key pairs and crosses are maintaining within yesterday’s range.

With yesterday’s retreat, it appears as the Dollar has just entered sideways trading. For the time being, expect more sideways trading. In USD/JPY, we’ll keep a watch on 110.01 minor support and 1.1768 minor resistance. As long as these levels hold, the greenback’s climb is likely to resume. However, a break will signal that a deeper pullback is started.

Initial unemployment claims in the United States fell by -12k to 375k in the week ended August 7, above expectations of 367k. The four-week moving average of initial claims increased by 1.75 thousand to 396 thousand. In the week ending July 31, continuing claims fell -114k to 2866k, the lowest level since March 14, 2020. The four-week moving average of ongoing claims fell by 100 thousand to 3101 thousand, the lowest level since March 21, 2020.

In July, the US PPI for final demand increased by 1.0 percent mom, exceeding expectations of 0.6 percent mom. PPI surged to 7.8% YoY during the last 12 months, up from 7.3 percent YoY, exceeding the 7.4% YoY forecast. This is the highest year-over-year increase since November 2010. The PPI for final demand, excluding food, energy, and trade services, increased by 0.9 percent mom, the most since January. PPI for final demand, excluding food, energy, and trade services, increased 6.1 percent year on year in the last year, the most since August 2014.

Dollar Momentum May Persist in the Near Term

The US dollar may continue rising. As per most analysts, in the near term. On a long time frame, analysts caution that, with other central banks already active and the Federal Reserve remaining dovish, these monetary policy divergences will put even more pressure on the US dollar.

The USD/JPY pair continued its sideways consolidation into the North American day, remaining restricted to a tight range slightly below the mid-110.00s. The USD/JPY pair was subdued/range-bound on Thursday as a combination of diverging drivers failed to give any major impetus.

Despite continued COVID-19 difficulties, the safe-haven Japanese yen was undercut by the underlying positive optimism in the financial markets as the dollar maintains its recovery.