DXY drop during 4th of July celebrations
The US dollar sold off aggressively last week while Americans were celebrating their independence. The week started with extremely weak manufacturing and non-manufacturing results from the US for the month of June followed by the FOMC meeting minutes which was dominated by the Feds acknowledgment that price pressures were easing before the June non-farm payrolls rolled in at a slightly stronger than expected print of 206 thousand, down from 218 thousand in May. The Fed did however add a pinch of caution to the minutes as they refrained from committing to interest rate cuts despite the PCE inflation metric falling to 2.6% as it creeps towards the Feds inflation target of 2%, for the month of May. The hard data such as the latest US GDP and PMI indicators are clearly showing that the US economy is starting wheeze which could be the reason for this week’s dollar sell-off as the market increases its bets for a September rate cut despite the Feds “cautious” messaging.
The calendar for the week is packed with prints that will either support or break last week’s optimism for September rate cuts. Firstly, Fed chair Jerome Powell will deliver his two-day testimony for the congress before the highly anticipated June US CPI print. A weaker than expected UC CPI will add fuel to the current sentiment while an elevated figure will reduce the bets on the Fed’s “caution” bluff. also be keep a hawk high on the 10-year and 30-year US bond auction results this week.
Technical: The DXY failed to break above the resistance level at 105.95 which invalidates our previous call for a move to 107.35. The DXY is now hanging onto the 50-day MA support at 105.12 and the 61.8% Fibo rate at 104.73 will also add some support for the dollar. A break below 104.73 will see the DXY slide below the 200-day MA and into the red support range at 104.00. On the lower timeframes the DXY is heavily oversold which will allow it to re-test levels above the 50-day MA but the daily RSI still has room to move lower which could see the DXY test out the waters below the 200-day MA.
The calendar for the week is packed with prints that will either support or break last week’s optimism for September rate cuts. Firstly, Fed chair Jerome Powell will deliver his two-day testimony for the congress before the highly anticipated June US CPI print. A weaker than expected UC CPI will add fuel to the current sentiment while an elevated figure will reduce the bets on the Fed’s “caution” bluff. also be keep a hawk high on the 10-year and 30-year US bond auction results this week.
Technical: The DXY failed to break above the resistance level at 105.95 which invalidates our previous call for a move to 107.35. The DXY is now hanging onto the 50-day MA support at 105.12 and the 61.8% Fibo rate at 104.73 will also add some support for the dollar. A break below 104.73 will see the DXY slide below the 200-day MA and into the red support range at 104.00. On the lower timeframes the DXY is heavily oversold which will allow it to re-test levels above the 50-day MA but the daily RSI still has room to move lower which could see the DXY test out the waters below the 200-day MA.
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