US Dollar inches closer to 96 as recovery continues

Eren Sengezer FXStreet

The US Dollar Index, which tracks the greenback against a basket of six trade-weighted peers, edged higher in the NA session to a fresh session peak at 95.99 on solid ISM PMI reading. As of writing, the index was at 95.97, up 0.6% on the day.

Coming off a week of heavy losses, the greenback gathered some bullish momentum in the first trading day of the second half of 2017. The index's upsurge seemed to be a technical correction during the Asian and the European sessions. However, better-than-expected Manufacturing PMI data released by the ISM in the NA session provided an additional boost to the index.

Strong ISM manufacturing bolsters Fed hike case - ING

Although the final Manufacturing PMI data released by Markit missed the expectations as it dropped to 52.1, the negative effects of that reading on the greenback were countered by the ISM's data. According to the ISM, the PMI increased to 57.8 in June from 54.9 in May with all the sub-indexes, including the Employment and Prices Indexes, advancing higher in the month. Commenting on the survey results, Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management said that suppliers were having trouble keeping up with the orders.

In the meantime, Treasury bond yields in the U.S. rise for the seventh consecutive day on Monday, giving the greenback an extra boost. The 10-year T-bond yield is at the moment at 2.35%, up 2.08% on the day while the 2-year reference is recording its best percentage gains since mid-June as it adds 2.3%.

The DXY could have a difficult time finding a fundamental catalyst in the remainder of the session and on Tuesday as the U.S. markets will be closed due to the Independence Day holiday.

Technical outlook

With a daily close above 96, the index could aim for 96.30 (Jun. 28 high), 97.15 (Jun. 27 high) and 97.60 (Jun. 15 high). On the downside, supports could be seen at 95.70 (Jun. 28 low), 95 (psychological level) and 94.40 (Aug. 16, 2016, low).

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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