The dollar is bid as risk-off impulses were triggered by China – BBH

Eren Sengezer FXStreet

Economists at BBH note that the dollar stays bid at the start of the week with China triggering risk-off impulses.

DXY is up for the second straight day

"DXY is up for the second straight day and is trading near 106.30 currently. Last week’s euro rally ran out of steam near $1.0360, which is the 62% retracement objective of the June-July drop. After failing to break that level twice, the euro is currently trading back below $1.02."

"Sterling is currently trading near $1.2060 and the break below $1.2110 sets up a test of the August 5 low near $1.20."

"USD/JPY is trading flat near 133.40 despite the risk-off backdrop. A break above 134.10 is needed to set up a test of the August 8 high near 135.60."

"The commodity currencies and EM FX are underperforming due to the poor data out of China. We maintain our strong dollar call as the dollar smile seems intact. Once this risk-off period ends, the dollar should still benefit from the relatively strong US economic outlook. However, we acknowledge that a period of consolidation is possible likely to be seen until markets readjust Fed tightening expectations higher."

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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