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DXY Higher Despite Weak Data
The US Dollar is pushing higher today, despite a set of weaker-than-forecast ISM figures yesterday. The manufacturing PMI for June was seen slipping back to 48.5 from 48.7 last, below the 49.2 the market was looking for. Importantly too, the prices component was seen cooling to 52.1 from 57 prior, below the 55.8 the market was looking for. This is the latest we’ve seen in a string of weaker US data recently including CPI, durable goods, home sale and PCE.
US Jobs Data on Friday
Looking ahead this week, we have the FOMC minutes due tomorrow but the big focus will be on the June jobs report on Friday. Following the softer figures we saw at the prior reading, further weakness this time around will drive September easing expectations higher, weighing on USD near-term. The scale of any downside surprise will determine the market reaction we get but with current CME pricing for a September cut sitting below 60% there is plenty of room for this to jump higher, causing a strong downside reaction in USD. Similarly, however, if we see an upside surprise in Friday’s data, this will see September easing chances falling, driving USD higher near-term.
US Elections Impact
Alongside the focus on the Fed, traders are also watching the US elections. The latest polls show Trump edging ahead of current president Joe Biden. With the Supreme Court ruling this week in favour of Donald Trump, granting presidents immunity prosecution for official acts. While he could still be tried for unofficial acts (linked to subverting the 2022 election), it is unlikely any case will be brought ahead of the upcoming elections. For now, a Trump presidency is being view as USD positive due to lower regulatory control, higher protectionism and growth-positive policies alongside heightened geo-political uncertainty.
Technical Views
DXY
The rally in DXY has seen the index breaking back above the 105.70 level, underpinned by the bull channel lows. With momentum studies turning higher, focus is on a continuation higher while the bull channel holds, putting focus on the 107.04 level next.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.