The end of the month, quarter and semester brought considerable buying flow of US dollars

By: Miguel A. Rodriguez

15:22, 01 July 2021

Investment portfolio adjustments started unusual volatility

But not all the causes of this purchase of dollars can be based on portfolio adjustments. In addition to this, the economic figures that were published were highly supportive of the dollar.

The ADP private employment survey surprised with the 692k figure compared to the 600k expected. This reading becomes important when there is a different number than expected because the market takes it as a precedent of the prominent employment figure published the next day. If the latter also surprises in the same direction, it could have a high impact on financial assets, especially on the US dollar.

Real estate

On the other hand, the real estate market figures - pending homes sales - showed a considerable increase of 8% in May from just a drop of the -0.8% expected. The real estate market is one of the sectors experiencing a more significant recovery in the US economy after the crisis, low-interest rates, and excess liquidity provided by fiscal and monetary stimuli. The measures are enormously boosting this sector of the economy, this being reflected in the recently published data. Thus, there is still no excessive concern regarding the creation of a new real estate bubble. If it remains at this trend rate, it could impact monetary policy decisions and, therefore, the price of financial assets.

 US Dollar

Following the latest economic metrics, the US dollar has once again reached new highs in recent months, reflected in the USD/JPY pair, with levels not seen since the end of last March. However, a reaction of the US bond yields, with which they have a high and positive correlation, has not been signaled after the data got published.

Technically, it has surpassed the recent highs at 110.95. A close above these levels opens the way towards the primary resistance zone where the longer-term downtrend would be terminated, around 112.25.

Today, the market will be awaiting the OPEC+ meeting to determine the decision of the oil-producing countries on increasing production. The market expects figures to range between 500k and 1M BPD (barrels per day). Everything will depend mainly on Saudi Arabia. Meanwhile, the market continues to be bullish, even more so after the United States crude inventory figure was published yesterday. The reserves had an unexpected fall to 6.7 M barrels compared to the 4.6 M forecasted.

 

Sources:  bloomberg.com, reuters.com

 

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