- The index fully reverses the initial decline to the 108.00 area.
- The US second quarter GDP revision surprised to the upside, coming in at -0.6% qoq.
- All attention remains on the start of the Jackson Hole Symposium.
The US dollar index (DXY), which measures the USD against a set of its main competitors, manages to curb the initial pessimism and returns to the 108.60 area.
The dollar index regains composure after the data
After falling to the 108.00 zone -or weekly lows-, the index recovers some balance and is now flirting with the 108.60 area despite the decline in US yields and after the upbeat results of the US calendar.
Indeed, a further revision of the GDP growth rate sees the economy shrink 0.6% quarter-on-quarter in the April-June period, while initial claims rose by 243,000 in the week to August 20, outpacing Also estimates.
Meanwhile, the Jackson Hole Symposium is due to kick off later in the session amid investor preference, which now leans toward a 75 basis point rate hike in September, and expectations of further support for plans. Fed tightening by Chairman Powell in his speech on Friday.
What to watch out for around the dollar
The resumption of risk-on sentiment among investors drags the dollar from the recent test of yearly highs north of the 109.00 barrier.
The firm conviction of the Federal Reserve to continue raising interest rates until inflation appears to be well controlled, despite a probable slowdown in economic activity and a certain loss of momentum in the labor market, seems to reinforce the strength of the dollar.
DXY, meanwhile, is poised for additional volatility amid investors pricing in the Fed’s next move, ie a 50 or 75 basis point hike in September.
Regarding the macroeconomic scenario, the dollar appears to be supported by the Fed’s divergence from most of its G10 peers (especially the ECB) combined with bouts of geopolitical turmoil and the occasional resurgence of risk aversion.
Technical levels
The index is now down 0.06% at 108.53 and faces next support at 107.99 (weekly low Aug 25), seconded by 106.21 (55-day SMA) and then 104.63 (monthly low Aug 10). To the upside, a break above 109.29 (15 Jul high) would target 109.77 (Sep 2002 monthly high) and then 110.00 (round level).
Source: Fx Street
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