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Published On: Wed, Jul 30th, 2014

Dollar strength ahead of GDP data and the Fed release

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The US dollar outperformed all its six major rivals before key economic releases on Wednesday, sending the dollar index to a six-month high.

Dollar strength ahead of GDP data and the Fed release

The dollar index, measuring the greenback performance against a basket of six other major currencies, hit a half-year high prior to the second quarter GDP report. Another highlight of the US economic calendar of the day is the outcome of the Federal Reserve’s last policy meeting, later on Wednesday.

Other key figure expected by investors is the nonfarm payrolls report for July, to come Friday. Janet Yellen, Fed Chairwoman, said earlier this month that if the labor market recovery persisted there could be a rise in rates sooner than previously anticipated.

With the US economic recovery on track, there has been strengthening in the USD in the recent sessions. As the US Commerce Board pointed Tuesday, this month consumer confidence soared to the highest level observed for the last seven years.

The EUR/USD was gradually drifting lower to touch 1.34, marking the lowest level since November 21. Technically speaking, the euro has been looking heavy on the charts since 22 July, when it breached a long-term support trend line. On the fundamental front, the pressure for selling the common currency could be explained by the divergence in the monetary policies of the European Central Bank and its main counterparts.

The USD/JPY reached its highest quote since July 7, 102.15; the USD/CHF was trading at 0.9073, close to a six-month peak.

The sterling declined to a month and a half low at 1.6930. Eyes now are on the 1.69 dynamic support; a break there could be an early sing of a reversal or at least of a more serious correction.

The NZD, AUD and CAD all weakened against their American counterpart. The dollar index measuring the USD performance relative to a basket comprising of six major currencies rose to 81.40. The former is approaching the key resistance at 81.55. Should a breach occur at that level, the US dollar is expected to continue its rally.

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