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July 1, 2022
Talking Points:
After falling the most in two weeks yesterday, DXY picks up bids to reaffirm its intraday high at 105.00. During today’s Asian trading session, the DXY bounced off it’s fortnightly low and now seems to be following the US Treasury yields.
In doing so, the DXY appears to support both the market’s concern on the importance of the US ISM Manufacturing PMI for June, which is predicted to be 55.0 versus 56.1 previously and the overall risk of a worldwide slowdown.
The USD was devalued yesterday as concerns about the health of the largest economy in the world were heightened by weaker than expected US household expenditure and the Fed’s preferred inflation indicator. The benchmark 10-year bond coupons fell below 3.0 % before bouncing back to 3.01 % at the close, representing a decline of almost 50 basis points (bps) from June’s top. This decline could also be related to the depressed US Treasury yields.
The S&P 500 Futures continue to be under pressure for the fifth straight day around a one-week low, reflecting the atmosphere.
Speaking of the figures, personal spending decreased to a three-month low of 0.2 % in May compared to the 0.5 % predicted and the 0.6 % downwardly revised prior to the results. US personal income for May matched market expectations and increased by 0.5 % month-on-month. The Personal Consumption Expenditure (PCE) Price Index also reproduced May’s year-on-year figures at 6.3 %.
More significantly, the Fed’s favoured inflation indicator, the Core PCE Price Index, met forecasts, coming in at 4.7 % year on year versus 4.9 % previously.
After observing the resurgence of USD bulls, traders should hold off until the US ISM Manufacturing PMI for June in order to more accurately predict the movements. The discussions concerning inflation and recession will be crucial.
Technical Analysis
In the absence of a daily close below the 21-day simple moving average (SMA), which is now around 104.00 USD at the time of publishing, DXY is likely to continue advancing towards and resetting the yearly high, which is currently around 105.80.
Fundamental Analyst for Global Markets
James has over 20 years of experience trading FX, cryptocurrencies and investments products for a range of investment banks and brokers
He spent the last 10 years analyzing and writing about foreign exchange, crypto-currencies and the global financial markets
He has also spoken at a range of conferences around the globe on various financial topics.
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