U.S. DOLLAR ANALYSIS & TALKING POINTS
U.S. DOLLAR ANALYSIS & TALKING POINTS
US services PMI forgotten for now.Safe haven demand playing a role in stronger dollar.DXY lingers at key inflection point.
USD FUNDAMENTAL BACKDROP
The Dollar Index (DXY) has been moving against the bearish sentiment sparked by yesterday’s poor ISM non-manufacturing PMI report. It seems as if investors are almost ignoring the dovish re-pricing of the Federal Reserve‘s upcoming interest rate expectations for next week – now likely to remain on hold with a roughly 75% probability.
FEDERAL RESERVE INTEREST RATE PROBABILITIES
Source: Refinitiv
There may be a safe haven play with the conflict between Russia/Ukraine escalating giving some short-term support to the greenback. That being said, with no high impact economic data scheduled this week, trading is likely to remain relatively range bound alongside the low volatility environment.
TECHNICAL ANALYSIS
U.S. DOLLAR INDEX DAILY CHART
Chart prepared by Warren Venketas, IG
Daily DXY price action shows bulls attempting a break above the longer-term trendline resistance but with fundamentals pointing to a weaker US economy, the greenback will face some downside pressure. Next week’s double risk event including the FOMC announcement and CPI print may keep the dollar afloat in the lead up before investors look to favor a directional bias.
Looking at the Relative Strength Index (RSI) indicator, the DXY is coming off overbought levels and could point to subsequent downside to come once markets get clarity from the Fed and inflation report respectively.
Resistance levels:
200-day MA (bulls)105.00104.70Trendline resistance
Support levels:
104.00103.3850-day MA (yellow)
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