The Dollar loses momentum due to the growing economic difficulties

• The price of the US dollar is positive this Wednesday against the main currencies.
• The release of a new series of data, including US GDP, could push the dollar further lower.
• The Dollar Index gave as low as 104.00 and could move further back to 103.00.

He US dollar (USD) it is losing its luster, since the dollar is no longer king. Declining US Consumer Confidence data and a sharp drop in JOLTS Job Openings point to a firm reversal of the impressive performance of the US economy since last year. With several data starting to be preliminary and signs of a crisis, the tipping point could come sooner than the US Federal Reserve assumes, and it may be necessary to cut interest rates sooner than necessary to avoid sinking the US economy and achieve a soft landing.

More data is awaited to assess whether Tuesday’s numbers were exceptional or confirm that the US economy is beginning to unravel. Markets will mainly focus on the second estimate of the US Gross Domestic Product due to be released later this Wednesday. To this we must add the monthly variation in ADP employment, which will serve as an advance of the non-agricultural payrolls that will be published on Friday.

Daily Summary: Dollar advances against major pairs

• The US economic calendar begins at 11:00 GMT with the Mortgage Bankers Association (MBA) Weekly Claims Index. The previous result was a decrease of 4.2%.
• The monthly variation of ADP employment will be published at 12:15 GMT. Although there is no correlation to Friday’s official US jobs number, it does create a bit of a glimpse into what could be coming up on Friday. The previous figure was 324,000, and it is expected to drop to 195,000.
• The second estimate of the US Gross Domestic Product will be released at 12:30 GMT. For the second quarter, the Price Index is expected to remain stable at 2.2%. Annualized GDP growth will not vary with respect to preliminary estimates, which stood at 2.4%. In addition, the wholesale inventory index for July will be published, which is expected to go from -0.5% to -0.4%.
• The US data schedule will be rounded out this Wednesday with Pending Home Sales at 14:00 GMT for both monthly and yearly results. The monthly reading is expected to decline by 0.6% in July, up from a 0.3% increase in the previous month. The annual figure was -15.6% in June, with no forecast for July.
• Asian equity markets are slightly in the green, with no noteworthy outliers. The picture is similar in Europe, where traders wait idly for confirmation of US economic numbers. US stock futures are trading slightly lower and could still change sign.
• CME Group’s FedWatch tool shows that markets are pricing the chance that the Federal Reserve will keep interest rates unchanged at its September meeting at 86.5%. The 78% probability was quickly reassessed after the pessimistic data from the JOLTS report.
• The 10-year US Treasury yield is trading at 4.13%, down sharply, as investors have gone long on US bonds and stocks.

Dollar Index Technical Analysis: Recovery Under Pressure

The US dollar is in good shape this Wednesday morning, after taking a beating on Tuesday from the substantial contraction in the JOLTS job openings number. Even so, the lustrous dollar is starting to fade a bit and that is translating to the US Dollar Index (DXY) dipping below 104.00. The DXY summer rally remains intact, although it is starting to come under pressure.

On the upside, 104.69, the maximum of May 31, comes into play as a level to beat. Once that level is broken and consolidated, we will have to wait until 105.00, where 105.10 (the high of March 15) is an ideal candidate for a double top. Should the dollar continue to advance, a test is expected at 105.88, the 2023 high on March 8.

On the downside, several bottoms are likely to prevent a steep drop in the DXY. The first is the big figure of 104.00. Although looking at the current drop, it doesn’t seem strong enough to hold. Rather look for the 200-day SMA at 103.14. This is a much better candidate for capturing some of the taking profit pressure and getting back in. Should it fail to hold, the safety net at 102.33 comes into play, which holds both the 55-day SMA and the 100-day SMA.