The dollar was on track to post its biggest quarterly gain in a year on Friday and gains for the 11th consecutive week as investors priced in the likelihood of a still solid economy and higher rates for longer. The greenback retraced most earlier losses against a basket of currencies to be only slightly lower on the day, following data that showed that U.S. consumer spending increased in August, but underlying inflation moderated, with the year-on-year rise in prices excluding food and energy slowing to less than 4.0%.
The dollar has gained on expectations that the U.S. economy will remain more resilient to higher interest rates and oil prices than other economies, after the Federal Reserve last week warned it may hike rates further and is likely to hold them higher for longer. The dollar index, which tracks the U.S. currency against six others, fell 0.05% to 106.09 on Friday and is track to end the quarter up 3.13% and post an 11th straight weekly rally – its longest such run in nine years. It is down from a 10-month high of 106.84 on Wednesday. Despite weaker levels on Thursday and Friday some analysts see the greenback as likely to continue to outperform.
Meanwhile, a partial government shutdown is looming, which could affect the release of economic data and potentially dent economic growth. Hardline Republicans in the U.S. House of Representatives on Friday rejected a bill proposed by their leader to temporarily fund the government, making it all but certain that federal agencies will partially shut down beginning Sunday. A government shutdown would “undermine” U.S. economic progress by idling key programs for small businesses and children, and could delay major infrastructure improvements, U.S. Treasury Secretary Janet Yellen said on Friday. The euro gained 0.10% on the day to $1.0578, but is set for its worst quarter against the dollar in a year, with a 3.08% decline. The single currency has bounced from an almost nine-month low of $1.0488 on Wednesday.
Intraday Analysis | 1H |
Monday’s session could be used as a driver for next week, on Friday the markets closed the weekly, monthly and quarterly bar, so in compliance with what has been said, we should be cautious, at least during the next 1-2 sessions. Having said this, it could be interesting to follow next sessions on small time frame (intraday charts) in search of some Pattern to trade.
If we look at 1H chart for example, during the Friday session the pair triggered an interesting technical rebound, which had already been expected for a few sessions, which could generate two opposite Patterns: an ABCDE Pattern with a bearish harmonic structure (as we trade it) and an ABC Bullish Pattern, potentially developed in the areas shown on the chart.
Patterns that might appear:
🔴 ABCDE Pattern with a bearish harmonic structure
🔴 12345 Bearish Structure
🔴 ABC Bullish Pattern
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