Daily Analysis For US Doller Index 19-06-2023

Daily Analysis For US Doller Index 19-06-2023

US Doller Index Analysis


Key Points: -


·       The US Dollar Index is currently positioned defensively, hovering near its lowest levels in the past five weeks, but it has shown some upward movement in recent times.


·       The observance of the Juneteenth holiday has provided a chance for the DXY to recover from its recent losses, primarily supported by the hawkish bias of the Federal Reserve and mixed economic data from the United States.


·       As we look ahead to the coming days with a relatively light economic calendar, it will be crucial to monitor the risk catalysts and the discussions surrounding the Federal Reserve, especially in anticipation of Fed Chair Powell's Testimony and the release of PMIs.


Today's Scenario: -


The US Dollar Index (DXY) has managed to recover around the 102.30-40 level after recent losses, with a sluggish start to the Monday morning trading session in Asia. This lackluster performance can be attributed to the Juneteenth holiday in the US, which has resulted in decreased market interest. Additionally, the DXY's rebound can be partly attributed to concerns of a more hawkish stance from the Federal Reserve. However, the US Dollar bears remain hopeful due to mixed economic data and the relatively hawkish moves by the European Central Bank (ECB).


Preliminary readings of the University of Michigan (UoM) Consumer Sentiment Index (CSI) for June showed improvement, but the easing of US inflation expectations has tempered the bullish sentiment towards the US Dollar. Nonetheless, recent statements from Fed policymakers, expressing a more hawkish view, have allowed the DXY to consolidate its recent losses in the face of a slow start to an important week. It's worth noting that the US Dollar Index experienced its largest drop since early January last week.


The latest US Federal Reserve (Fed) Monetary Policy Report to the US Congress, released on Friday, indicated that "inflation in the US is well above target and the labor market remains very tight," as reported by Reuters. The report also highlighted considerable uncertainty regarding the outlook for the funds rate, according to Reuters.


Richmond Fed President Thomas Barkin cautioned against further rate hikes, citing the risk of a significant economic slowdown. However, he also mentioned that the Fed has the tools to manage a resilient US economy, which led to a rise in 2-year Treasury bond yields to 4.75% and helped the US Dollar rebound from its recent lows. In addition to Barkin, Chicago Fed President Austan Goolsbee and Federal Reserve Governor Christopher Waller also expressed slightly more hawkish views, contributing to the DXY's reversal from multi-day lows the previous day.


On the other hand, downbeat US inflation and Retail Sales, combined with the Fed's decision to pause its hawkish stance, have bolstered the DXY bulls. Positive news from China, including constructive talks between US Secretary of State Antony Blinken and Chinese Foreign Minister Qin Gang, has also influenced market sentiment. However, the talks yielded limited agreements, with a future meeting in Washington planned to continue discussions, according to Reuters. Furthermore, the South China Morning Post (SCMP) reported positive signals from the China State Council, stating that they are considering macroeconomic policies to expand effective demand, strengthen the real economy, and mitigate risks in key areas.


Against this backdrop, S&P500 Futures are reflecting mild losses on Wall Street due to the absence of US stock and bond market participants on Monday. This situation may impact the future movements of the DXY. However, the market will closely monitor Fed Chairman Powell's bi-annual testimony and the release of PMIs for June for further guidance and clarity.



Diagram of US Dollar Index (DXY): -


Economic Events : -


Date      Event                                                                                                             Impact       Currency

 04:00   (New Zealand) Services NZ PSI                                                                         Low     NZD

 04:00   (New Zealand) Composite NZ PCI                                                     Low    NZD

 05:30   (United States) Juneteenth                                                                            None     USD

 09:05   (Japan) 52-Week Bill Auction                                                                           Low     JPY

 13:30   (Australia) Myfxbook AUDUSD Sentiment                                 Medium AUD

 13:30   (Switzerland) Myfxbook USDCHF Sentiment                              Medium CHF

 13:30   (Japan) Myfxbook USDJPY Sentiment                                                      Medium   JPY

 13:30   (European Union) Myfxbook EURUSD Sentiment                                   Medium  EUR

 13:30   (United Kingdom) Myfxbook GBPUSD Sentiment                                   Medium  GBP

 13:30   (Canada) Myfxbook USDCAD Sentiment                                                 Medium    CAD

 13:30   (New Zealand) Myfxbook NZDUSD Sentiment                                        Medium  NZD

 13:30   (Euro Area) ECB Survey of Monetary Analysts                                                Low  EUR

 15:00   (Germany) 12-Month Bubill Auction                                                               Low    EUR

 16:00   (Portugal) Current Account                                                                              Low     EUR

 16:30   (Euro Area) ECB Lane Speech                                                                           Low     EUR

 17:10   (Euro Area) ECB Schnabel Speech                                                     Low    EUR

 18:00   (Canada) PPI YoY                                                                                Low       CAD

 18:00   (Canada) PPI MoM                                                                                           Low       CAD

 18:00   (Canada) Raw Materials Prices YoY                                                   Low    CAD

 18:00   (Canada) Raw Materials Prices MoM                                                              Low    CAD

 18:30   (France) 3-Month BTF Auction                                                                        Low     EUR

 18:30   (France) 12-Month BTF Auction                                                                      Low     EUR

 18:30   (France) 6-Month BTF Auction                                                                        Low     EUR

 19:30   (United States) NAHB Housing Market Index                              Medium USD

 23:30   (Euro Area) ECB Guindos Speech                                                      High   EUR



Buy Scenario: -


The prospects of a complete recovery are uncertain unless the quote manages to stay below the 50-day moving average (DMA) resistance level, which is currently around 102.60. Till we do not advise to buy US Dollar Index.


Sell Scenario: -


The US Dollar Index has experienced a rebound from a rising support line that has been in place for the past two months, with the latest reading near 102.05. Till we do not advise to sell in US Dollar Index


Support and Resistance Level: -

 Support              Resistance  

 S1 102.06   -     R1 102.48

 S2 101.82  -      R2 102.67

 S3 101.64  -      R3 102.90


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