- The US Dollar turns flat ahead of US session after gaining in early trading.
- The bond market is signalling issues ahead with Trump’s spending plans.
- The US Dollar index falls back below 106.00 ahead of JOLTS numbers.
The US Dollar (USD) gained strength on Tuesday before falling flat, with the bond market fretting over former US President Donald Trump’s spending plans. The possibility of Trump being reelected as President gained a lot after the US Supreme Court ruling confirmed on Monday that Trump has partial immunity in the court cases on the riots that ended in a breach at the US Congress. With the recent spending plans revealed by the former President, the bond market is worried about where the money will come from while local market conditions could turn into higher inflation again.
On the US economic front, the calendar is relatively light in terms of data. However, from a speaker’s point of view, the big guns are out. European Central Bank (ECB) President Christine Lagarde and the US Federal Reserve (Fed) Chairman Jerome Powell will take the stage at the Sintra ECB symposium.
Daily digest market movers: Here comes the headlines
- At 13:30 GMT, Fed Chairman Jerome Powell and ECB President Christine Lagarde will participate in a panel about monetary policy at the ECB Forum on Central Banking in Sintra, Portugal.
- The JOLTS Job Openings figure for May will be released at 14:00 GMT. A slide towards 7.9 million is expected from the previous count of 8.059 million.
- Equities are cracking a bit under pressure on the back of the reaction in the bond market after Trump’s legal victory. Both European and US equities are in the red ahead of the US session.
- The CME Fedwatch Tool is broadly backing a rate cut in September despite recent comments from Fed officials. The odds now stand at 59.9% for a 25-basis-point cut. A rate pause stands at a 34.7% chance, while a 50-basis-point rate cut has a slim 5.4% possibility.
- The US 10-year benchmark rate trades near 4.44% and prints a new high for the week.
US Dollar Index Technical Analysis: Here it gets tricky
The US Dollar Index (DXY) is gaining on the back of some risk-off sentiment that entered the markets late Monday. The change of heart came after the US Supreme Court ruling that fell partially in favor of former US President Donald Trump. With the DXY now gaining more momentum, the threat grows by the day the Japanese government might intervene to safeguard the Japanese Yen (JPY).
On the upside, the pivotal level of 105.89 is being regained, which is a must have for additional gains. Once a daily close has taken place above that level, marching above the red descending trend line in the chart below at 106.26 and the peak of April at 106.52 are the two main resistances ahead of a fresh nine-month high. That would be reached once 107.35 is being broken to the upside.
On the downside, 105.53 is the first support ahead of a trifecta of Simple Moving Averages (SMA). Next down is the 55-day SMA at 105.25, safeguarding the 105.00 round figure. A touch lower, near 104.75 and 104.46, both the 100-day and the 200-day SMA form a double layer of protection to support any declines together with the green ascending trendline from last December.
US Dollar Index: Daily Chart
