USD Index Rallies On Strong Personal Consumption Data

After a rough week and a half, the USD Index is showing signs of life. September USD Index futures are currently pushing intrasession highs, led by strength against the Euro, Canadian dollar, and Australian dollar. It appears that the currency markets are beginning to price in Wednesday’s strong reading for U.S. Q2 GDP.

Economic Metrics

The pre-U.S. session brought the release of several economic metrics. Here is a quick look at the important data:

Event                                                                                      Actual             Previous        Projected

Continuing Jobless Claims (Aug 17)                                   1.708M                1.728M             1.725M

Initial Jobless Claims (Aug 24)                                               213K                      214K              210K

Core Personal Consumption, Price Index(YoY,July)          2.0%                      1.9%              2.0%

Personal Income (MoM, July)                                                0.3%                      0.3%              0.4%

The headliner of this group is the Core Personal Consumption Price Index (YoY, July). It is listed as a primary market mover and serves as a compliment to quarterly GDP. Today’s release came in right on schedule at 2.0%, up from the previous number, 1.9%.

On the downside, Personal Income (MoM, July) lagged the previous release but came in as projected. Much of this discrepancy may be attributed to seasonality and a much larger employment pool being included in the calculation.

USD Index Futures

September USD Index futures are in the green for the session and have posted a firm test of daily topside support. Earlier, price tested and failed at the 38% current wave retracement (94.830). If the intraday top of  94.850 holds, then an intermediate-term bearish bias will remain valid.

For the near future, I have two levels on my radar for the September USD Index:

• Resistance(1): 38% Current Wave Retracement, 94.830
• Support(1): August Low, 94.290

Overview: After the weakness shown by the USD over the past 2+ weeks, one has to wonder if the Greenback is in a position to rebound. With a September FED rate hike rapidly approaching, will currency traders begin bidding the USD en masse?

The CME FedWatch Index is currently assigning a 67% chance of a December FED rate hike, the fourth of the year. If this sentiment holds steady or grows, the August low (94.290) in USD Index futures may prove to be an intermediate-term bottom for this market.