Published on Jun 13, 2023

Daily Analysis For US Doller Index 13-06-2023

US Doller Index Analysis

Key Points: -

· The US Dollar Index faces challenges in extending its corrective bounce from a three-week low, putting an end to its two-day winning streak.

· Market sentiment remains largely certain that the Federal Reserve (Fed) will not implement a rate hike in June. However, concerns about the possibility of a rate hike in July remain uncertain.

· Movements in the bond market and various factors challenging market sentiment contribute to the bearish stance on the US Dollar Index. This sentiment persists ahead of the release of the key US Consumer Price Index (CPI) data.

· The core CPI data will be closely observed, as high inflation levels have the potential to allow the Federal Open Market Committee (FOMC) to maintain a hawkish stance despite their decision not to raise interest rates.

Today's Scenario: -

The US Dollar Index (DXY) remains under pressure around 103.60 as it ends its two-day winning streak on Tuesday, ahead of the release of key US inflation data. The recent mixed concerns about the Federal Reserve's (Fed) future actions and challenges to market sentiment weigh on buyers of the US Dollar.

A study conducted by the San Francisco Fed, which highlights the weak correlation between wage growth and inflation, contributes to the less hawkish stance on the US central bank and weighs on the DXY. This, coupled with pre-data anxiety, adds to the cautious sentiment in the market.

There are additional factors challenging market sentiment, such as the developing trade dispute between the US and China as the US expands its import ban from Xinjiang and China vows to protect its firms against US sanctions. Furthermore, US Treasury Secretary Janet Yellen's prepared remarks suggest concerns about nontransparent and unsustainable lending practices, particularly from China.

Global institutions like the International Monetary Fund (IMF) and the Organisation for Economic Co-operation and Development (OECD) have also raised concerns about the impact of higher interest rates on the global economy.

Despite these challenges, increased bets on a 0.25% rate hike by the Federal Reserve in July provide some optimism and support for the US Dollar Index. However, the CME's FedWatch Tool suggests limited expectations for the Fed to take action at the upcoming Federal Open Market Committee (FOMC) meeting on Wednesday.

The US Dollar faces both challenges and concerns related to the Federal Reserve's decisions. Former Fed vice chair Richard Clarida expressed doubts about achieving the 2% inflation target, and Eric Rosengren, former president of the Boston Federal Reserve Bank, tweeted about expectations of a hawkish skip this week.

Amidst these developments, US Treasury bond yields and stock futures struggle to find clear directions, reflecting the market's cautious mood. The US Dollar also benefits from its safe-haven appeal.

Looking ahead, the focus will be on the US Consumer Price Index (CPI) figures for May, as they hold significance for the upcoming Fed decision. The market will pay close attention to the Core CPI month-on-month figure, with softer numbers potentially pushing back concerns about a rate hike in July and preventing a hawkish tone from the Fed, which could weigh on the US Dollar.

Diagram of US Dollar Index (DXY): -

Economic Events : -

Date Event Impact Currency

4:15 (New Zealand) Visitor Arrivals YoY Low NZD

5:20 (Japan) BSI Large Manufacturing QoQ Low JPY

6:00 (Australia) Westpac Consumer Confidence Change High AUD

6:00 (Australia) Westpac Consumer Confidence Index High AUD

7:00 (Australia) NAB Business Confidence High AUD

11:30 (Germany) Harmonised Inflation Rate MoM Low EUR

11:30 (Germany) Harmonised Inflation Rate YoY Low EUR

11:30 (Germany) Inflation Rate MoM Medium EUR

11:30 (Germany) Inflation Rate YoY Medium EUR

11:30 (Germany) CPI High EUR

11:30 (United Kingdom) Average Earnings excl. Bonus (3Mo/Yr) Low GBP

11:30 (United Kingdom) Average Earnings incl. Bonus (3Mo/Yr) Medium GBP

11:30 (United Kingdom) Unemployment Rate High GBP

11:30 (United Kingdom) Claimant Count Change High GBP

11:30 (United Kingdom) Employment Change High GBP

11:30 (United Kingdom) HMRC Payrolls Change Low GBP

12:30 (Lithuania) Current Account Low EUR

12:30 (Spain) CPI High EUR

12:30 (Spain) Core Inflation Rate YoY Low EUR

12:30 (Spain) Harmonised Inflation Rate MoM Low EUR

12:30 (Spain) Harmonised Inflation Rate YoY Low EUR

12:30 (Spain) Inflation Rate MoM Low EUR

12:30 (Spain) Inflation Rate YoY Low EUR

13:30 (China) Total Social Financing Low CNY

13:30 (China) New Yuan Loans Low CNY

13:30 (China) M2 Money Supply YoY Low CNY

13:30 (China) Outstanding Loan Growth YoY Low CNY

14:10 (Spain) 3-Month Letras Auction Low EUR

14:30 (Euro Area) ZEW Economic Sentiment Index Medium EUR

14:30 (Germany) ZEW Economic Sentiment Index High EUR

14:30 (Germany) ZEW Current Conditions Low EUR

14:30 (United Kingdom) 10-Year Treasury Gilt Auction Low GBP

14:40 (Italy) 3-Year BTP Auction Low EUR

14:40 (Italy) 7-Year BTP Auction Low EUR

14:40 (Italy) 30-Year BTP Auction Low EUR

15:00 (Germany) 5-Year Bobl Auction Low EUR

15:15 (Euro Area) ECB Enria Speech Low EUR

15:30 (Latvia) Current Account Low EUR

15:30 (United States) NFIB Business Optimism Index Low USD

17:30 (Ecuador) Balance of Trade Low USD

18:00 (United States) Core Inflation Rate MoM Medium USD

18:00 (United States) Inflation Rate MoM High USD

18:00 (United States) Core Inflation Rate YoY High USD

18:00 (United States) Inflation Rate YoY High USD

18:00 (United States) CPI High USD

18:00 (United States) CPI s.a High USD

18:15 (Germany) Current Account Low EUR

18:25 (United States) Redbook YoY Low USD

19:30 (United Kingdom) BoE Gov Bailey Speech Medium GBP

20:30 (United Kingdom) BoE Dhingra Speech Low GBP

21:00 (United States) 52-Week Bill Auction Low USD

22:30 (United States) 30-Year Bond Auction Low USD

Buy Scenario: -

On the upside, if the market manages to overcome the resistance level at 103.84 (R1), it would indicate a continuation of the uptrend, with the next target at 104.06 (R2). Till we do not advise to buy US Dollar Index.

Sell Scenario: -

The main trend for the market is upward, but the momentum is currently showing a downward trend.

The market has been consolidating for a few days and is currently in a vulnerable position, with momentum shifting toward the downside.

If the downward momentum persists, there is a possibility of increased selling pressure pushing the market toward the support level at 103.33 (S1). Till we do not advise to sell in US Dollar Index