DXY Bulls Relax Ahead of Market Events, FOMC and Q2 GDP

26 July 2021 | Updated: 26 July 2021

The DXY – dollar index fell in early Monday trading, weighed down by a surge in risky currencies, although it remains close to its three-and-a-half-month high set last week.

The broader increase stays unchanged, with sustained sideways trading regarded as a plausible scenario ahead of this week’s Fed policy meeting and US GDP data. The market anticipates a more hawkish position from the Fed, as well as a shift in verbiage, signaling the start of the gradual reduction of monetary support, which may happen as early as this year.

The DXY was also bolstered by a quickening US economic recovery, which would influence the Fed’s decision. The economy increased at an annual rate of 8.6% in the second quarter, compared to 6.4 percent in the first. This week, investors will be looking for earnings reports from several S&P 500 businesses. This could affect market tone.

Market Events: FOMC and Q2 GDP

The FOMC meeting on Wednesday will be the center of central bank attention this week. Will it is a repeat of Fed Chairman Powell’s semi-annual testimony to Congress, or will hawks members be able to persuade him that the labor market has made “additional considerable improvement” and that tapering can begin soon? With tech titans FB, AAPL, MSFT, AMZN, and GOOGL reporting earnings this week, earnings will be front and center.

The question will be when the committee will inform the markets that tapering is imminent. Markets will know well in advance before tapering begins, according to Fed Chairman Powell. Powell stated in his most recent testimony that the job market has not made “additional meaningful improvement” to justify tapering. He said in March that there would have to be a streak of positive months of statistics. As a result, while June’s Non-Farm Payroll print was +850,000, May’s revised print was only +583,000 (weaker than expected), and April’s print was only +266,000. (much weaker than estimated). This week, the US will report Core PCE, which is widely regarded as the Fed’s preferred indicator of inflation (although not until Friday, after the FOMC meeting.)

The term “month-end data” refers to information collected at the end of the month. Not only will the FOMC meet this week, but there will be a slew of other economic data items to keep an eye on. We’ll expect releases of US, German, and Eurozone Q2 GDP, as well as German Unemployment Change, Australian CPI, and US Core PCE.

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Dollar Declines Again As Yen and EUR Stays Strong

23 April 2021 | Updated: 23 April 2021

In dollars, there is a new sell-off, while the euro was lifted today by strong PMIs. But before the close of the week, it could have been swallowed up by the yen. Moderate risk aversion in Europe keeps the yen afloat. US futures are mixed at the time of writing, but appear vulnerable.

As for the week, the dollar finished with the worst performers, followed by the Aussie and the Loonie. The yen is likely to be the strongest currency, followed by the euro.

The US dollar, in terms of the US dollar index (DXY), is reversing Thursday’s pullback and revisiting the 91.00 area at the end of the week. Thursday’s positive price action around the US dollar was boosted by the recent surge in coronavirus cases, especially in India and Japan, and President Biden’s plans to increase the capital gains tax.

Nevertheless, the index resumes its decline and on Friday again puts the 91.00 marks, always on the background of improving sentiment in the complex of risks and the lack of serious growth in US yields.

Indeed, the dollar is losing momentum and extending the volatile activity seen in past sessions as it moves to the lower end of the recent range around the key support in the 91.00 zones. The greenback is struggling to hold its ground around 91.00 amid continuing consolidation sentiment, always expecting a resumption of the soft note on US yields and a loss of enthusiasm for reflation/vaccine trade in the US.
Yen and EUR Stays Strong
Positive corporate reports so far have been good for most, and in Europe, Nestlé also released surprisingly strong data today showing the food giant grew more than twice as fast as expected. Markets in Europe and Asia have shown positive dynamics today, despite the record number of infections in India. The euro strengthened against the US dollar ahead of today’s ECB meeting. Oil prices remain volatile amid rising coronavirus cases and rising US oil inventories.

Japan’s economy continued to grow gradually due to aggressive monetary easing, which had a positive impact on bank profits, ”said Bank of Japan (BOJ) Governor Haruhiko Kuroda speaking in parliament on Friday. Kuroda added: “Bank profitability has declined as a trend due to the continued environment with low-interest rates, structural factors such as an aging population.”

Yesterday, the ECB first lowered the single currency slightly before the euro returned to the path of strength. ECB President Christine Lagarde denied expectations that the central bank is already considering limiting bond purchases and made it clear that the ECB remains focused on improving data on the eurozone. At the same time, Lagarde expressed optimism and predicted a sustained recovery for the region in the second half of the year, which will further support the euro. Strong PMI readings in the eurozone today, which showed that both the services and manufacturing sectors continued to grow in April, add to the positive sentiment.

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After Strong NFP Report, Dollar Strengthens and 10-Year Yields Surge to 1.6

5 March 2021 | Updated: 5 March 2021

The dollar continued to rise early in the US session following the release of a much stronger-than-expected nonfarm payroll report. The yield on the 10-year bond also rose sharply and is now over 1.6 again. The dollar is currently the second strongest in a week, behind only the oil-backed Canadian dollar. Although the Swiss franc and the yen are trying to recover against other currencies, in particular against commodity currencies, both of them still post the worst results in a week.

The number of people employed in the non-agricultural sector of the United States in February rose by 379 thousand, well above expectations of 148 thousand. The previous month’s figure was also sharply revised from 49 thousand to 166 thousand. Overall, total non-farm employment continued to decline by -9.5 million, or -6.2%, compared to the pre-pandemic level in February 2020.

The unemployment rate fell to 6.2% from 6.3%, better than expected at 6.4%. average hourly earnings rose 0.2% MoM, in line with expectations. The labor force participation rate remained at 61.4%. The US trade deficit widened to -68.2 billion US dollars in January against expectations of -67.5 billion US dollars. Canada’s trade surplus was C $ 1.4 billion against expectations of C $ 1.4 billion.
US Dollar Index (DXY) Hits 2021 High, Rises Past 92.00
The index remained at 92.00 on Friday after the US nonfarm employment index largely beat forecasts in February. The economy added 379,000 jobs and increased the previous print volume to 166,000.

After the First Reaction, the US Dollar Index (DXY) jumped to its highest level since late November at 92.14. At the time of writing, the DXY is up 0.5% on the day to 92.10. The dollar’s march northward remains unchanged and is trading at new 2021 highs above the 92.00 barriers tracked by the United States Dollar Index (DXY).

The dollar’s push above 92.00 was also helped by the yield on the 10-year US benchmark, which briefly tested levels above the 1.60% benchmark for the first time since February 2020. The dollar continues to outperform its peers following the report and the US dollar. The index was last up during the day at 92.00.

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US Dollar Rebounds, Yields Rise Amidst Weakening ADP Job Growth

3 March 2021 | Updated: 3 March 2021

The dollar is recovering early in the US session as weakening job gains from the ADP reduce stock futures. Besides, Treasury yields rebounded slightly. At the moment, the pound sterling is the strongest in the day, followed by the Canadian dollar. The New Zealand dollar tops the lower Australian currency, followed by the Swiss franc and the yen. Now attention will be drawn to the movement of yields, the reaction of the stock, and the general sentiment.

In February, the number of employed in the private sector of the US ADP increased by 117 thousand, which is lower than the forecast of 168 thousand people. By the size of the company, the small business added 32 thousand jobs, medium business – 57 thousand, large business – 28 thousand. By sector, the number of jobs in the production of goods decreased by -14 thousand. The number of jobs in the service sector increased by 131.

The labor market continues to show a sluggish recovery, according to Nela Richardson, the chief economist at ADP. We can see that large companies are increasingly feeling the impact of COVID-19, while job growth in the goods sector is stalled. As the pandemic is still in the spotlight, the service sector remains at a significantly lower level than it was before the pandemic; however, this sector is likely to gain the most over time through reopening and increased consumer confidence.
The Dollar Index (DXY) Regains but Stays Capped
The dollar continues to be supported by the fundamental background. DXY was unable to advance further north of 91.00 on a more serious note on Wednesday, retreating into negative territory after hitting multi-week peaks in the 91.35 / 40 band.

Investors continue to debate whether incentives from the government and central bank are excessive. The possibility of inflation accelerating as the global economy recovers have raised concerns that monetary policy may need to be tightened sooner than expected. This boosted sovereign bond yields this year and halted bullish rallies in the stock markets.

Despite the strong rebound, the current DXY spike is seen as corrective only as the broader bearish outlook continues to weigh on the dollar. If the region 91.60 is passed, then the next focus of attention should shift to the level (fall of 2020-2021) at 92.46.

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US dollar remains under pressure

7 December 2020 | Updated: 7 December 2020

The USD rallied 0.60% in early in late Asian – early European trade before failing to follow through higher and dropped immediately after retesting Wednesday’s open and Thursday’s highs. Fundamentally speaking we are sill very much bearish here and the next ley level is the 90.375 which is the February – March 2018 key resistance level.

Once this level broke back in 2018 the DXY rallied 13.7% for about 2 years so this is quite the level to look for. Should this level break  the next level is the 89.50

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