- The DXY index is moving around the 104.00 area and extends Monday’s losses.
- US yields rise a bit after Monday’s holiday.
- The Chicago Fed Index and Existing Home Sales stand out on today’s economic calendar.
The US dollar index DXYwhich measures the strength of the dollar against a basket of major currencies, extends the pessimism seen earlier in the week and retest the 104.20 area at the start of the European session on Tuesday.
DXY index remains vigilant awaiting Powell
The DXY index loses ground for second consecutive session and extends the negative start of the week, although it manages to hold above the 104.00 level for now.
Meanwhile, US spot markets return to normal activity after Monday’s holiday and show a small improvement in yields at the short end and in the middle part of the curve.
The dollar is expected to focus attention on the ongoing debate over another likely 75 basis point rate hike by the Fed in Julywhile speculation continues to mount that the US economy could slip back into recession.
Highlights on today’s economic calendar include the release of the Chicago Fed National Activity Index, Existing Home Sales data, and a speech by T. Barkin of the Richmond Fed.
What can we expect around the USD
The DXY index came under pressure after reaching new highs around 105.80 following the Fed’s 75 basis point rate hike on June 15.
Meanwhile, the dollar remains well supported by the Fed’s monetary policy divergence from most of its G10 peers (especially the ECB), combined with bouts of geopolitical turmoil, rising US yields .and a possible “hard landing” of the US economy, all factors that favor a stronger dollar in the coming months.
Relevant DXY US Dollar Index Levels
At time of writing, the DXY index is down 0.06% on the day, trading at 104.41. Next support is found at 102.53 (55-day SMA), followed by 101.29 (May 30 low) and 100.24 (100-day SMA). On the other hand, a break above 105.78 (15 Jun high), would open the door to 107.31 (Dec 2002 high) and finally 108.74 (Oct 2002 high).
Source: Fx Street
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