The US Dollar Index sees pressure building on 103 to break lower
The US Dollar (USD) sees its gains in the runup to the Richmond Manufacturing numbers being partially erased with yet another miss on estimates. Markets meanwhile are having difficulties with the Bank of Japan (BoJ) rate decision this Tuesday. BoJ governor Kazuo Ueda has tested the markets’ patience by not hiking, and postponing the long-awaited exit out of negative rates. Markets are starting to recover near the US opening bell after the initial reaction was rather negative in reaction to the nerve game the BoJ is playing, with US yields jumping higher and equities flat to mildly negative.
On the economic front, the miss on estimates in the Richmond Manufacturing Index is eating into the earlier gains the US Dollar booked in the run up towards the number. All eyes will now be towards Thursday and Friday with the US Gross Domestic Product on Thursday and the Personal Consumption Expenditures on Friday. On the other side of the Atlantic, the European Central Bank is set to hold its first meeting on Thursday. The US Dollar Index (DXY) is not giving up that easily on its opportunity to possibly pop back up above the important resistance at the 200-day SImple Moving Average (SMA) near 103.48. Despite downside pressure with lower highs and lower lows, the DXY for now is not selling off as one would expect in these kinds of conditions. Expect the main rehearsal to come on Thursday with the ECB rate decision, ahead of the US Federal Reserve meeting next week.
There are some economic data points that could still build a case for the DXY to get through those two moving averages again and run away. Look for 104.44 as the first resistance level on the upside, in the form of the 100-day SMA. If that gets scattered as well, nothing will hold the DXY from heading to either 105.88 or 107.20, the high of September. A bull trap looks to be underway, where US Dollar bulls were caught buying into the Greenback when it broke above both the 55-day and the 200-day SMA in last week's trading. Price action could decline substantially and force US Dollar bulls to sell their positions at a loss. This would see the DXY first drop to 102.60, at the ascending trend line from September. Once below it, the downturn is open towards 102.00.
There are some economic data points that could still build a case for the DXY to get through those two moving averages again and run away. Look for 104.44 as the first resistance level on the upside, in the form of the 100-day SMA. If that gets scattered as well, nothing will hold the DXY from heading to either 105.88 or 107.20, the high of September. A bull trap looks to be underway, where US Dollar bulls were caught buying into the Greenback when it broke above both the 55-day and the 200-day SMA in last week's trading. Price action could decline substantially and force US Dollar bulls to sell their positions at a loss. This would see the DXY first drop to 102.60, at the ascending trend line from September. Once below it, the downturn is open towards 102.00.