- US Dollar Index steadies around the weekly top, prints a three-day uptrend.
- Growth concerns and Fedspeak challenge market sentiment amid a sluggish session.
- Second-tier US data, risk catalysts to entertain traders ahead of Wednesday’s FOMC Minutes.
US Dollar Index (DXY) rises for the third consecutive day while picking bids to 106.58 during Tuesday’s Asian session. In doing so, the greenback’s gauge portrays the market’s rush for risk safety amid economic fears surrounding the US and China, as well as geopolitical woes surrounding Russia, China and the Middle East. It’s worth noting that the softer US data and hawkish Fedspeak magnify the market’s indecision and favor the DXY bulls.
That said, the downbeat statistics from China and the US gained major attention from the DXY bulls, especially amid the recession fears.
US NY Empire State Manufacturing Index for August dropped to -31.3 from 11.1 in July and 8.5 market forecasts. Further, the US August NAHB homebuilder confidence index also fell to 49 versus 55, its lowest level since the initial months of 2020.
Elsewhere, China’s Retail Sales eased to 2.7% YoY in July versus 5.0% expected and 3.1% prior whereas Industrial Production (IP) edged lower to 3.8% during the stated month, from 3.9% prior and 4.6% market forecasts. Additionally, the People’s Bank of China (PBOC) surprised markets on Monday by cutting the one-year medium-term lending facility (MLF) rates by ten basis points (bps) and trying to push back the bears.
It should be noted that headlines suggesting improved coronavirus conditions in China's financial hub Shanghai and the resumption of the Russian bonds’ trading on Wall Street failed to improve the risk appetite. Furthermore, hopes of a probable meeting between US President Joe Biden and his Chinese counterpart Xi Jinping, as signaled by the Wall Street Journal (WSJ), could favor the risk-on mood. On the same line were comments from China’s President Xi suggesting more efforts to revive the world’s second-largest economy.
Elsewhere, Reuters reported that the United States, South Korea and Japan participated in a missile warning and ballistic missile search and tracking exercise off Hawaii's coast last week, the Pentagon said on Monday. It was also revealed afterwards that the US and South Korea would hold joint military drills from August 22 and September 01. The geopolitical fears are an extra burden on the market sentiment and propel the DXY.
Amid these plays, the US 10-year Treasury yields print a three-day downtrend around 2.775% while the S&P 500 Futures decline 0.13% intraday at the latest.
Moving on, today’s second-tier US housing and activity data might entertain the DXY traders ahead of Wednesday’s FOMC Minutes. Should the US data continue to arrive as softer, the greenback’s gauge could remain on the bear’s radar.
Technical analysis
A sustained upside break of the three-week-old resistance line, now support around 106.35, directs DXY bulls towards the monthly peak surrounding 107.00. However, the bulls need validation from late July’s peak near 107.45 to approach the yearly top marked in July around 109.30.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD bounces back, trades above 1.0860

EUR/USD bounced from a fresh weekly low of 1.0827, as the US Dollar lost steam following a weak ISM Manufacturing PMI report and words from Federal Reserve Chair Jerome Powell. Powell reiterated its hawkish message, dismissing potential rate cuts in the near future.
GBP/USD turns north ahead of the weekly close

GBP/USD recovered above 1.2650 in the American session on Friday. The US Dollar lost its temporal momentum and ends the weekly with a soft note amid soft local data. Hawkish comments from BoE officials underpinned the Pound this week.
Gold resumes advance and approaches record highs

Gold price (XAU/USD) quickly changed course after the US opening, trading above $2,050 a troy ounce. The US Dollar gave up intraday gains following the release of a worse.-than-anticipated IS Manufacturing PMI, indicating persistent weekends mid-Q4.
Solana likely to extend gains as DeFi airdrop season could boost user base

Solana ecosystem will see airdrops from projects like Jupiter, Marginfi, Drift, Zeta and Jito. Solana users are projected to increase between 30% and 80% from native token launches, according to Messari’s latest report. SOL price extends rally, yielding nearly 4% daily gains.
Weekly focus: Disinflation continues

This week, inflation came in below expectations in the euro area and the US. In the euro area, headline inflation fell much more than expected to 2.4% y/y (consensus: 2.7% y/y) in November from 2.9% in October.