US Dollar outmatched by Asian currencies on Tuesday
The US Dollar (USD) is pausing its decline and keeps hovering around Tuesday's low after the National Federation of Independent Business (NFIB) Small Business Optimism Index jumped from 89.4 to 91.00, breaking above the consensus of 89.9. This unfortunately does not erase the current downtrend as the biggest descent comes on the back of the People’s Bank of China (PBoC) latest decision which is stepping up its stimulus and rescue packages for the construction sector. The support is being applauded in the region and has pushed Chinese stocks higher while Asian currencies are in demand against the Greenback.
Out of the economic data calendar no real big events that could trigger a sudden turnaround in the tone for the US Dollar. The National Federation of Independent Business (NFIB) already came out above expectations at 91.00. Interesting to see after the NFIB print, will be the Economic Optimism Index from the TechnoMetrica Institute of Policy and Politics (TIPP) in order to get confirmation if there really is an uptick or rather a decline in economic sentiment. That number is expected at 14:00 GMT, and comes after the speech of James Bullard, the President of the Federal Reserve Bank of St. Louis, at 13:00 GMT. The US Dollar is continuing its decline for a fourth straight day in a row as this time Asian currencies are overpowering the Greenback, while the NFIB upbeat number is just too little to make a significant difference. Halfway through the European trading hours, the US Dollar is down nearly 0.50% against the Japanese Yen (USD/JPY), the South Korean Won (USD/KRW), and the Chinese Yuan (USD/CNY). The support and demand for Asian currencies come from China, where the government will speed up its promised support packages for the much-battered construction sector. This boosted the belief in a speedy recovery in China and made the US Dollar Index (DXY) retreat for another day.
On the upside, look for 102.811 at the 55-day Simple Moving Average (SMA), which will have regained partially its importance after having been chopped up that much a few weeks ago. Only a few inches above the 55-day SMA, the 100-day SMA comes in at 102.96 and could create a firm area of resistance in between both moving averages. In case the DXY makes its way through that region, the high of July at 103.57 will be the level to watch for a further breakout. On the downside, the only thing in the way to stop the DXY from hitting 101.00 is the psychological handle at 101.50. Once that level is breached, not many relevant levels to look for as it will become a quick decline to 101.00 and start testing the lows of May. Special notice for 100.75 as that level is a floor since February 2nd and could open the door for a slide below 100.00 one broken through it.
On the upside, look for 102.811 at the 55-day Simple Moving Average (SMA), which will have regained partially its importance after having been chopped up that much a few weeks ago. Only a few inches above the 55-day SMA, the 100-day SMA comes in at 102.96 and could create a firm area of resistance in between both moving averages. In case the DXY makes its way through that region, the high of July at 103.57 will be the level to watch for a further breakout. On the downside, the only thing in the way to stop the DXY from hitting 101.00 is the psychological handle at 101.50. Once that level is breached, not many relevant levels to look for as it will become a quick decline to 101.00 and start testing the lows of May. Special notice for 100.75 as that level is a floor since February 2nd and could open the door for a slide below 100.00 one broken through it.