The U.S. Dollar Meeting Support Lines

The economic recovery is underway in the United States, but growth should remain volatile and fragmented for some time. Unemployment is the big challenge, while the housing market should give some relief the household pockets. The U.S. dollar is expected to decline further over the medium/long term, albeit it finds good supports at current levels.

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U.S.: A weaker dollar positive?

In the United States, the Conference Board leading economic indicator index increased for the six straight month in September. Eight out of ten components improved, confirming that the economic recovery is underway. The expansion of global economies, as well as the decline of the U.S. dollar, should help exports over the medium term. However, growth might remain fragile for some time, as domestic demand is still weak. In reality, a weaker dollar could be the cure for the huge U.S. current account deficit, which has declined steady since its peak in 2005. The housing market is at the contrary expanding, although swinging data is common during this stage of growth. After few good months of gains during which housing starts rebounded 23% from April’s low, housing starts rose only 0.5% in September to 590,000 units annualized from Augusts’ 587,00. Starts are up 23% from April, but they are still 28% below the level of one year ago.

Dollar Edges Higher

The dollar was mixed against the majors, climbing higher against the euro to 1.4628 but sliding versus the British pound past the 1.64-level to 1.6419. Spot gold rose to a new record high above the $1,080-mark to $1,083.50 per ounce while crude oil continued to trade beneath $80-per barrel.

The US economic reports released earlier today saw September durable goods and factory orders. The headline durable goods orders increased by 1.4% in September versus 1.0% previously, while the ex-transportations figure rose by 1.2% from 0.9% in August. Meanwhile, factory orders reversed the 0.8% decline in August, increasing by 0.9%.

The key highlight on Wednesday will be the ADP private sector payrolls, which are seen improving to reflect a loss of 188.0k jobs in October from 254.0k jobs a month earlier. Also due out tomorrow will be the October non-manufacturing ISM report, estimated to improve to 51.8 from 50.9 in September.