Summary:

• USD hits 1-year high as price looks to break higher
• Solid US data with initial jobless claims falling and a beat for Philly Fed 
• AUDUSD and USDCHF could be poised for a breakout

The US dollar is enjoying another good day of gains with the buck rising against all of its peers and chalking up some pretty large moves higher against emerging market currencies in particular. There are no fewer than 7 currencies losing 1% or more against the buck on the day with the JPY holding up best and only lower by 0.2% at the time of writing.  

 

 USD is rising across the board today with some large gains in particular seen against EM currencies. Source: xStation

The US dollar was already trading firmly higher before the only economic releases of note this afternoon, and better than forecast readings on the labour market and from a well known manufacturing survey have provided further good news for USD bulls. First up, let’s look at the initial jobless claims which fell by 8k to 207k, notably lower than the 220k expected. This metric has been in a prolonged downtrend in recent years with today’s reading marking a new low, indicating further that the US labour market is tightening.  

 Initial jobless claims fell once more in the past week, extending the downtrend that’s been in place for several years. Source: XTB Macrobond

At the same time as the jobless figures we also got the Philly Fed manufacturing index for July, which also beat forecasts. A print of 25.7 was comfortably higher than the 21.6 expected, and the prior reading of 19.9. 3 of the last 4 releases for this data point have now beaten forecasts and with the recent improvement in the Chicago equivalent the outlook for manufacturing remains strong.   

 Philly Fed rose by more than forecast to support the recent rise in the Chicago PMI and indicates that the manufacturing sector is in good health. Source: XTB Macrobond

These pleasing data points have added more fuel to the strength in the US dollar, with a trade-weighted index moving to its highest level since last July. Price has been consolidating in recent months after a strong move higher began in April, but in moving above 95.20 the market may have made a decisive break higher.  

 

 US index has reached its highest level in a year today and the market is looking to make a decisive break higher after moving back above 95.20. Source: xStation

We earlier mentioned that the GBPUSD had fallen through the key psychological level of 1.30, so now let’s look at 2 other pairs which could be set for significant breakouts if this USD moves gains traction; USDCHF and AUDUSD.

 USDCHF is probing recent highs around 1.0040 and a weekly chart reveals that this has previously been a key resistance level. A break above here could target a move to 10.335. Source: xStation

 AUDUSD has been in a clear falling channel for most of the year and is now approaching prior lows at 0.7310. A clean break below here may see the downtrend extend with little by the way of swing support until 0.7160. Source: xStation