Will the Disinflation Trend Reinforce DXY Downward Momentum?
Macro theme:
- The highlight of the past week was inflation data. US Jun headline CPI slowed to 3% YoY (vs. 3.1% expected, 3.3% previous), and core
CPI was 3.3% YoY (vs. 3.4% expected and previous).
- The core service component has been declining, and rental prices may continue to fall due to delayed contract renewals.
With this inflation trend, markets expect the Fed to make its first rate cut in Sep and another this year.
- The dollar is likely to weaken, depending on the pace of monetary easing by other countries. If all major economies cut rates simultaneously, currency pairs may remain stable.
Technical:
- From a technical perspective, DXY broke its ascending channel and closed below both EMAs, shifting to bearish momentum. The index is right above its key support at 104.00.
- If DXY extends its decline below 104.00, it may aim for a nearby support area around 102.75-103.00.
- On the contrary, if 104.00 can hold the index above for a while, DXY may correct up to 104.90 before resuming its downward movement.
- The highlight of the past week was inflation data. US Jun headline CPI slowed to 3% YoY (vs. 3.1% expected, 3.3% previous), and core
CPI was 3.3% YoY (vs. 3.4% expected and previous).
- The core service component has been declining, and rental prices may continue to fall due to delayed contract renewals.
With this inflation trend, markets expect the Fed to make its first rate cut in Sep and another this year.
- The dollar is likely to weaken, depending on the pace of monetary easing by other countries. If all major economies cut rates simultaneously, currency pairs may remain stable.
Technical:
- From a technical perspective, DXY broke its ascending channel and closed below both EMAs, shifting to bearish momentum. The index is right above its key support at 104.00.
- If DXY extends its decline below 104.00, it may aim for a nearby support area around 102.75-103.00.
- On the contrary, if 104.00 can hold the index above for a while, DXY may correct up to 104.90 before resuming its downward movement.
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