US Doller Index Analysis

Key Points: -

·       The US Dollar Index is trading near its lowest levels in three weeks, ending a two-day streak of gains.

·       Despite yields showing positivity, the US Dollar (USD) is weighed down by US inflation data, which strengthens the market's belief that the Federal Reserve (Fed) will maintain its current stance.

·       The cautious sentiment preceding the FOMC announcements provides support for the US Dollar's price.

·       Anticipations of a potentially hawkish pause from the US central bank underscore the importance of qualitative updates from the Fed.

Today's Scenario: -

The US Dollar (USD) struggles to recover from its recent lows and remains under pressure during the Asian session on Wednesday. The USD Index (DXY), which measures the USD against a basket of currencies, hovers around the 102.80 level, down more than 0.10% for the day. Traders eagerly await the outcome of the highly-anticipated Federal Open Market Committee (FOMC) monetary policy meeting.

The FOMC is expected to announce its decision at 18:00 GMT on Wednesday, and it is widely anticipated that there will be no interest rate hike. This expectation is based on the latest US consumer inflation data released on Tuesday, which showed minimal growth in the headline Consumer Price Index (CPI) for May, and the annual increase was the smallest since March 2021. This has led to a cautious stance among USD bulls, although the downside seems limited leading up to the important central bank event.

Although the year-on-year inflation rate still exceeds the 2% target, the Fed may choose to maintain its hawkish stance. Furthermore, the market has priced in a higher probability of a 25 basis points rate hike at the July FOMC meeting. This has resulted in a sharp increase in US Treasury bond yields overnight. Combined with a slight decline in US equity futures, it prevents traders from taking aggressive bearish positions on the safe-haven USD and limits further losses.

In addition to the pivotal FOMC decision, investors will closely analyze the comments made by Fed Chair Jerome Powell during the post-meeting press conference for insights into the future path of interest rate hikes. This will significantly influence the short-term dynamics of the USD and help investors determine its next directional move. Meanwhile, the release of the US Producer Price Index (PPI) on Wednesday during the early North American session could provide some momentum to the USD.

Diagram of US Dollar Index (DXY): -

Economic Events : -

Date      Event                                                                                            Impact        Currency

 02:00   (United States) API Crude Oil Stock Change                  Medium             USD

 04:15   (New Zealand) Current Account                                                  Medium NZD

 05:30   (New Zealand) Food Inflation YoY                                         Low NZD

 10:00   (Netherlands) Balance of Trade                                                          Low  EUR

 10:30   (Finland) Inflation Rate YoY                                                                 Low  EUR

 10:30   (Finland) Inflation Rate MoM                                                              Low  EUR

 10:30   (Finland) CPI                                                                                         Low     EUR

 11:30   (United Kingdom) GDP 3-Month Avg                                          Medium GBP

 11:30   (United Kingdom) Goods Trade Balance Non-EU                              High GBP

 11:30   (United Kingdom) Balance of Trade                                      Low GBP

 11:30   (United Kingdom) Construction Output YoY                       Low GBP

 11:30   (United Kingdom) Industrial Production YoY                       Low GBP

 11:30   (United Kingdom) Industrial Production MoM                            Medium             GBP

 11:30   (United Kingdom) Manufacturing Production YoY             Low GBP

 11:30   (United Kingdom) Manufacturing Production MoM    Medium            GBP

 11:30   (United Kingdom) Goods Trade Balance                                            High GBP

 11:30   (United Kingdom) GDP YoY                                                                 Low  GBP

 11:30   (United Kingdom) GDP MoM                                                             High  GBP

 11:30   (Germany) Wholesale Prices MoM                               Medium EUR

 11:30   (Germany) Wholesale Prices YoY                                  Medium EUR

 12:30   (China) FDI (YTD) YoY                                                                   Medium   CNY

 12:30   (Slovakia) Inflation Rate MoM                                                            Low  EUR

 12:30   (Slovakia) Inflation Rate YoY                                                                Low  EUR

 12:30   (Slovakia) Core Inflation Rate MoM                                      Low EUR

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

 12:30   (Slovakia) CPI                                                                                      Low      EUR

 13:30   (France) IEA Oil Market Report                                                   Medium  EUR

 14:30   (Euro Area) Industrial Production MoM                                     Medium EUR

 14:30   (Euro Area) Industrial Production YoY                                              Low  EUR

 14:30   (Montenegro) GDP Growth Rate YoY                                                Low  EUR

 15:00   (Germany) 10-Year Bund Auction                               Medium  EUR

 15:30   (Portugal) Inflation Rate MoM                                                          Low    EUR

 15:30   (Portugal) Inflation Rate YoY                                                             Low    EUR

 15:30   (Portugal) CPI                                                                                     Low       EUR

 15:30   (Ireland) Residential Property Prices YoY                                          Low  EUR

 15:30   (Ireland) Residential Property Prices MoM                       Low EUR

 16:30   (United States) MBA 30-Year Mortgage Rate                Medium USD

 16:30   (United States) MBA Mortgage Applications                      Low USD

 16:30   (United States) MBA Mortgage Refinance Index                              Low USD

 16:30   (United States) MBA Mortgage Market Index                                  Low USD

 16:30   (United States) MBA Purchase Index                                                 Low  USD

 17:00   (United Kingdom) NIESR Monthly GDP Tracker                               Low GBP

 18:00   (Canada) New Motor Vehicle Sales                                     Low  CAD

 18:00   (United States) Core PPI MoM                                                  Medium    USD

 18:00   (United States) Core PPI YoY                                                             Low    USD

 18:00   (United States) PPI YoY                                                                      Low     USD

 18:00   (United States) PPI MoM                                                     High  USD

 20:00   (United States) EIA Heating Oil Stocks Change                                  Low USD

 20:00   (United States) EIA Refinery Crude Runs Change                              Low USD

 20:00   (United States) EIA Crude Oil Stocks Change               Medium USD

 20:00   (United States) EIA Distillate Stocks Change                      Low USD

 20:00   (United States) EIA Gasoline Production Change                             Low USD

 20:00   (United States) EIA Crude Oil Imports Change                                 Low USD

 20:00   (United States) EIA Gasoline Stocks Change                Medium USD

 20:00   (United States) EIA Cushing Crude Oil Stocks Change         Low              USD

 20:00   (United States) EIA Distillate Fuel Production Change         Low              USD

 21:00   (United States) 17-Week Bill Auction                                                 Low USD

 23:30   (United States) Fed Interest Rate Decision                          High              USD

 23:30   (United States) FOMC Economic Projections                        High              USD

 23:30   (United States) Interest Rate Projection - 1st Yr                           Medium            USD

 23:30   (United States) Interest Rate Projection - 2nd Yr                         Medium            USD

 23:30   (United States) Interest Rate Projection - Current        Medium            USD

 23:30   (United States) Interest Rate Projection - Longer                        Medium             USD

Buy Scenario: -

On the upside, if the market manages to overcome 103.61 (R1), it would indicate a continuation of the uptrend, with the next target being 104.21. Till we do not advise to buy US Dollar Index.

Sell Scenario: -

The primary trend indicates an upward movement, but the momentum is currently showing a downward trend.

Following a period of consolidation, the market finds itself in a vulnerable position as the momentum shifts towards the downside.

If the downward momentum persists, there is a possibility that selling pressure could push the market towards 103.01 (S1). Till we do not advise to sell in US Dollar Index

Support and Resistance Level: -

 Support              Resistance  

 S1 103.01   -     R1 103.61

 S2 102.73  -      R2 103.93

 S3 102.41  -      R3 104.21