Daily Analysis For US Doller Index 13-06-2023

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


Support and Resistance Level: -

 Support              Resistance  

 S1 103.33   -     R1 103.84

 S2 103.03  -      R2 104.06

 S3 102.81  -      R3 104.36


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