FXStreet (Łódź) - Martin Schwerdtfegerat, FX Strategist at TD Securities, suggests that we might see more dollar weakness in the nearest future, as disappointing data exerts pressure on the currency.
"This week US data has offered a checkered record, and themarket reaction has overweighed the negatives (i.e., dismal Q1 GDP final estimate and weak PCE) relative to the positives (e.g., renewed momentum in the housing market)."
"The combination of a deeper slide in Q1 and a softer upturn in Q2 mean lower output in absolute levels, even if H2 matches the stronger pace of growth we are still expecting."
"This, in turn, means a combination of smaller employment gains and lower productivity relative to the previous projections, and, consequently, a continuation of subdued wage growth dynamics."
"Pondering these developments, we think there is scope for further, albeit measured, USD weakness in the short term, as the USD has been adjusting to disappointments in the data with a lag."
"As for NFP, we believe the risks are asymmetrically stacked against the USD, as the bar for renewed confidence in the speed of the recovery going forward has been pushed higher by this week's data setbacks."
"Consequently, we believe EURUSD will likely test resistance at 1.3675 in the coming days, GBPUSD will extend gains into the high 1.70/low1.71 area and USDJPY will slip to 101.25/100.75 if it manages to break below the 200-day MA at 101.70."