Published on Jun 15, 2023

Daily Analysis For US Doller Index 15-06-2023

US Doller Index Analysis

Key Points: -

· The US Dollar Index is losing momentum after a brief recovery from its lowest level in a month.

· It remains under pressure following a two-day downtrend, despite the Federal Reserve's hawkish stance, positive dot plot, and economic projections, which have failed to impress USD bulls.

· The focus now turns to incoming US data, as Federal Reserve Chair Jerome Powell's speech emphasizes a "meeting by meeting" approach for interest rate decisions.

· Traders are closely monitoring the economic indicators for further guidance on the future direction of the US dollar.

Today's Scenario: -

The US Dollar Index (DXY) is facing selling pressure, reaching a new intraday low near 102.95 during the early Asian session. This comes after the US Federal Reserve (Fed) decided to pause its rate hike trajectory, reflecting the market's dovish sentiment towards the central bank.

The Fed's decision to keep the benchmark rate unchanged at 5.0-5.25% was in line with market expectations. However, the Fed's Economic Projections and Chair Jerome Powell's speech conveyed a hawkish tone, indicating optimism about the US central bank.

Of note, the dot plot for 2024 and 2025 showed an increase of 30 basis points to 4.6% and 3.4% respectively compared to March. The median rate forecasts suggest two more rate hikes in 2023. Additionally, there are no expectations of rate cuts or a recession in the current year, and the median GDP estimation for the US has risen to 1.0% from 0.4% in March. Powell's speech also hinted at a "meeting by meeting" approach for decision-making, with July being highlighted as a potentially live meeting for a 0.25% rate hike.

Prior to the Fed announcement, the US Producer Price Index (PPI) for May came in lower than expected at 1.1% year-on-year, compared to the forecast of 1.5% and the previous reading of 2.6%.

Given the impact of the Fed's actions on the market and the decline in the DXY, traders of the US Dollar Index will likely focus on upcoming data releases, such as US Retail Sales for May, as well as secondary activity data for May and June. The Fed has emphasized the importance of each incoming data point for decision-making.

Diagram of US Dollar Index (DXY): -

Economic Events : -

Date Event Impact Currency

0:00 (United States) Fed Press Conference High USD

4:15 (New Zealand) GDP Growth Rate YoY Medium NZD

4:15 (New Zealand) GDP Growth Rate QoQ Medium NZD

5:20 (Japan) Foreign Bond Investment Low JPY

5:20 (Japan) Stock Investment by Foreigners Low JPY

5:20 (Japan) Machinery Orders YoY Medium JPY

5:20 (Japan) Machinery Orders MoM Medium JPY

5:20 (Japan) Imports YoY Low JPY

5:20 (Japan) Balance of Trade High JPY

5:20 (Japan) Exports YoY Medium JPY

5:30 (Euro Area) Eurogroup Meeting Medium EUR

7:00 (Australia) Consumer Inflation Expectations Low AUD

7:00 (Australia) Part Time Employment Chg Medium AUD

7:00 (Australia) Participation Rate Low AUD

7:00 (Australia) Full Time Employment Chg Medium AUD

7:00 (Australia) Unemployment Rate High AUD

7:00 (Australia) Employment Change High AUD

7:00 (Australia) RBA Bulletin Medium AUD

7:00 (China) PBoC 1-Year MLF Announcement Low CNY

7:00 (China) House Price Index YoY Medium CNY

7:30 (China) Unemployment Rate High CNY

7:30 (China) Retail Sales YoY High CNY

7:30 (China) Industrial Production YoY High CNY

7:30 (China) Fixed Asset Investment (YTD) YoY Medium CNY

9:05 (Japan) 3-Month Bill Auction Low JPY

10:00 (Japan) Tertiary Industry Index MoM Low JPY

10:00 (Netherlands) Unemployment Rate Medium EUR

10:30 (Finland) GDP YoY Low EUR

12:00 (Switzerland) Producer & Import Prices MoM Low CHF

12:00 (Switzerland) Producer & Import Prices YoY Low CHF

12:15 (France) Inflation Rate MoM Medium EUR

12:15 (France) Inflation Rate YoY Medium EUR

12:15 (France) Harmonised Inflation Rate MoM Low EUR

12:15 (France) Harmonised Inflation Rate YoY Low EUR

13:30 (Spain) Balance of Trade Medium EUR

14:10 (Spain) Obligacion Auction Low EUR

14:10 (Spain) Bonos Auction Low EUR

14:30 (Euro Area) Balance of Trade Medium EUR

14:30 (France) 5-Year OAT Auction Low EUR

14:30 (France) 3-Year OAT Auction Low EUR

14:30 (Greece) Construction Output YoY Low EUR

14:30 (Montenegro) Inflation Rate YoY Low EUR

14:30 (Montenegro) Harmonised Inflation Rate YoY Low EUR

14:30 (Montenegro) Inflation Rate MoM Low EUR

15:00 (Belgium) Construction Output YoY Low EUR

15:30 (France) 10-Year Index-Linked OAT Auction Low EUR

15:30 (Ireland) Balance of Trade Low EUR

16:00 (Portugal) Economic Activity YoY Low EUR

16:00 (Portugal) Private Consumption YoY Low EUR

17:45 (Canada) Housing Starts Medium CAD

17:45 (Euro Area) ECB Interest Rate Decision High EUR

17:45 (Euro Area) Marginal Lending Rate Low EUR

17:45 (Euro Area) Deposit Facility Rate High EUR

18:00 (Canada) Manufacturing Sales MoM Low CAD

18:00 (United States) Import Prices YoY Low USD

18:00 (United States) Export Prices YoY Low USD

18:00 (United States) Import Prices MoM Medium USD

18:00 (United States) Export Prices MoM Medium USD

18:00 (United States) NY Empire State Manufacturing Index Medium USD

18:00 (United States) Retail Sales YoY High USD

18:00 (United States) Retail Sales Ex Autos MoM High USD

18:00 (United States) Retail Sales MoM High USD

18:00 (United States) Philly Fed Business Conditions Low USD

18:00 (United States) Philly Fed Employment Low USD

18:00 (United States) Philly Fed CAPEX Index Low USD

18:00 (United States) Philly Fed Prices Paid Low USD

18:00 (United States) Philly Fed New Orders Low USD

18:00 (United States) Philadelphia Fed Manufacturing Index Medium USD

18:00 (United States) Jobless Claims 4-week Average High USD

18:00 (United States) Continuing Jobless Claims High USD

18:00 (United States) Initial Jobless Claims High USD

18:00 (United States) Retail Sales Ex Gas/Autos MoM High USD

18:15 (Euro Area) ECB Press Conference High EUR

18:30 (Belgium) Balance of Trade Low EUR

18:30 (Kosovo) GDP Growth Rate YoY Low EUR

18:45 (United States) Capacity Utilization Low USD

18:45 (United States) Manufacturing Production YoY Low USD

18:45 (United States) Industrial Production YoY Medium USD

18:45 (United States) Industrial Production MoM Medium USD

18:45 (United States) Manufacturing Production MoM Low USD

19:30 (United States) Business Inventories MoM Medium USD

19:30 (United States) Retail Inventories Ex Autos MoM Low USD

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

21:00 (United States) 8-Week Bill Auction Low USD

21:00 (United States) 4-Week Bill Auction Low USD

21:05 (United Kingdom) BoE Cunliffe Speech Low GBP

21:30 (Canada) 2-Year Bond Auction Low CAD

21:30 (United States) 15-Year Mortgage Rate Low USD

21:30 (United States) 30-Year Mortgage Rate Low USD

Buy Scenario: -

The DXY reached its lowest level in a month after the US Federal Open Market Committee (FOMC) decided to keep the benchmark interest rate unchanged at 5.0-5.25%, aligning with market expectations. However, the optimistic FOMC Economic Projections and the speech by Federal Reserve (Fed) Chairman Jerome Powell reaffirmed the Fed's hawkish stance and sparked a rebound in the US Dollar.

It's worth noting that the US Dollar Index has found support above the 50% Fibonacci retracement level of the upside move from April to May, around 102.75 at the moment. Additionally, the Relative Strength Index (RSI) (14) indicates that the index is nearing oversold territory, further favoring the bullish outlook. The index has also maintained trading above the 200-period Simple Moving Average (SMA) after a brief dip following the Fed announcement.

However, there is a downward-sloping resistance line from June 6, currently around 103.40, posing immediate upside resistance for the US Dollar Index. Further ahead, the convergence of the 100-period SMA and a resistance line that has been in place for two weeks, near 103.85-90, presents a significant challenge for buyers. Till we do not advise to buy US Dollar Index.

Sell Scenario: -

On the flip side, sellers of the DXY would need confirmation from the 200-period SMA and the aforementioned Fibonacci retracement level, located near 103.00 and 102.75 respectively, to regain control. Nevertheless, the 61.8% Fibonacci retracement level, known as the "Golden Fibonacci ratio," around 102.30, could pose a strong obstacle for bearish momentum in the US Dollar Index. Till we do not advise to sell in US Dollar Index