Published on Jun 19, 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