The last quarter of a year is traditionally the most profitable for any stock market, but this year the Dow Jones Industrial Average is expecting to come in just a little stronger than it did last year. Markets seem to favor stocks that show strength in the housing sector and the health care industry, although oil prices are coming in for their worst week in many years. Let’s take a look at some factors influencing the market during this challenging week.
One of the main reasons that the dollar faces such a tough week ahead is that there is very little in the economic data to speak of. There was no new housing starts in May, no new home sales in June, and there was virtually no change in the job numbers. In fact, there was an exceptionally weak report on non-manufacturing employment released just before President Obama visited China. This news received a lot of attention, and some experts were quick to blame the lack of job growth on the Chinese economic system itself. Whether this is really the case or not, the optics of a weak report is not a good thing for the dollar.
So what should investors be watching out for? If you’re a believer in the strong economy that is the United States, you likely care more about inflation and job creation. Naturally, the Federal Reserve will do whatever it can to keep interest rates low to help support this recovery, and it’s easy to see the Fed acting on its beliefs regarding the economy. It hasn’t moved rates since July of 2021! Should we expect a move later this year?
If you’re less concerned with the outlook for the economy, then you’ll have a different view of this economic data. You’ll be looking more at what the impact will be on the dollar when it makes its way towards the end of the year. If you think the economic data says that rates are going to stay low, you might expect to see the dollar move against the euro and the UK pound. Should the economic data indicate that rates will begin to rise again, this could mean a stronger dollar (EURUSDUSD).
The question to ask here is whether there is any room for the dollar to recover from its recent weakness. The answer will have a lot to do with how global economic data affects the dollar. For instance, the recent strengthening of the Japanese Yen (JPY) might have an effect on the dollar, as the euro is weakening as well. However, if international trade continues as is, there shouldn’t be a major shift in the strength of the dollar against all currencies.
As the economic data comes in over the next few weeks, you can expect to see an incremental increase in the Euro against the dollar, while the USD moves against most other currencies. In addition, there could be some short-term fluctuations in the euro and GBP versus the USD. These events could mean that traders have to wait a little bit longer to make some serious money from forex trading. This is particularly true if you are relying solely on the strength of the US dollar.
If the economic data is weak or shows that there is going to be a major global economic event in the next few weeks, it will cause a sharp reduction in the trading volume. Traders will become uncertain about which way to bet. This will cause a major price change in the markets. The euro may weaken against the dollar, while the UK pound may rise against most other currencies.
As such, you need to take a long term view when watching international economic data. It is important not to get caught up in data trends which could be temporarily accurate, but long lasting. If you have already done so, then it’s time to buy the GBP/USD pair as they seem to be oversold at this point and may stay that way throughout the week. If you want to play it safe, you should stick with the EURUSD/USD currency pair. In either case, you can take advantage of major support levels as well as resistance levels to profit from strong moves in the markets.