- DXY navigates the low-104.00s and adds to Monday’s losses.
- US yields edge a tad higher following Monday’s inactivity.
- Chicago Fed Index, Existing Home Sales next on tap.
The US Dollar Index (DXY), which gauges the greenback vs. a bundle of its main competitors, adds to the pessimism seen at the beginning of the week and retests the 104.20 area on turnaround Tuesday.
US Dollar Index vigilant ahead of Powell
The index loses ground for the second session in a row and extends the negative start of the week, although it manages well to keep business above the 104.00 mark for the time being.
In the meantime, the US cash markets return to the normal activity following Monday’s Juneteenth holiday and show a small improvement in yields in the short end and the belly of the curve.
The dollar is expected to remain vigilant on the ongoing debate over another probable 75 bps rate hike by the Federal Reserve in July, while speculation that the US economy could slip back to recession remains on the rise.
In the docket, the Chicago Fed National Activity Index is due seconded by Existing Home Sales and the speech by Richmond Fed T,Barkin (2024 voter, hawk).
What to look for around USD
The index came under pressure after climbing to new highs around 105.80 in the wake of the Fed’s 75 bps rate hike on June 15.
The dollar, in the meantime, remains well supported by the Fed’s divergence vs. most of its G10 peers (especially the ECB) in combination with bouts of geopolitical effervescence, higher US yields and a potential “hard landing” of the US economy, all factors supportive of a stronger dollar in the next months.
Key events in the US this week: Chicago Fed National Activity Index, Existing Home Sales (Tuesday) – MBA Mortgage Applications, Powell’s Semiannual Testimony (Wednesday) – Initial Claims, Flash PMIs, Powell’s Semiannual Testimony (Thursday) – Final Consumer Sentiment (Friday).
Eminent issues on the back boiler: Powell’s “softish” landing… what does that mean? Escalating geopolitical effervescence vs. Russia and China. Fed’s more aggressive rate path this year and 2023. US-China trade conflict. Future of Biden’s Build Back Better plan.
US Dollar Index relevant levels
Now, the index is losing 0.06% at 104.41 and faces the next support at 102.53 (55-day SMA) followed by 101.29 (monthly low May 30) and then 100.24 (100-day SMA). On the other hand, a break above 105.78 (2022 high June 15) would open the door to 107.31 (monthly high December 2002) and finally 108.74 (monthly high October 2002).
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 rebounds from multi-week lows, trades above 1.0750
EUR/USD came under heavy bearish pressure and declined to its weakest level in three weeks below 1.0750 on Friday after the stronger-than-expected Nonfarm Payrolls data. Week-end flows, however, helped the pair erase its daily losses.
GBP/USD remains on track to snap three-week winning streak
GBP/USD recovered toward 1.2550 after coming in within a touching distance of 1.2500 in the second half of the day after Nonfarm Payrolls came in at 199,000 for November. Despite the recent rebound, the pair remains on track to snap a three-week winning streak.
Gold retreats below $2,020 as US yields push higher
Gold broke below its daily range and declined toward $2,010 with the immediate reaction to the upbeat US November jobs report. Although XAU/USD managed to recover toward $2,020, rising US Treasury bond yields triggered another leg lower.
Bitcoin price could retrace to $42,000 if US Nonfarm Payroll comes in at 180,000
Bitcoin price just like other assets, is highly impacted by the macro-financial developments. This includes the Nonfarm Payrolls (NFP) report released by the BLS of the United States.
The week ahead – Fed, ECB and Bank of England rate decisions
When the Federal Reserve kept rates unchanged back in November for the second meeting in a row there was still the distinct possibility that the final meeting of 2023 would provide the possibility of one more rate rise to round off the year in line with Fed policymakers dot plot forecasts of 5.6%.