The US Dollar consolidated to start the week while soft Chinese GDP numbers highlight growing concern for the economic recovery there. With the Fed in a blackout, where to for USD?
US Dollar, DXY Index, USD, China, Risk Off, Fed, FOMC, India, ECB – Talking Points
- The US Dollar oscillated to start the Monday session with many markets closed
- Chinese economic data missed estimates today raising hopes of more stimulus measures
- With the Fed in a media blackout, what will drive the DXY Index direction?
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The US Dollar nudged higher against the Aussie and Kiwi Dollars today but lost ground to the Japanese Yen and Swiss Franc in a risk-off type of currency move.
It may reflect the disappointing data from China today that was soft overall with the economy growing at 6.3% year-on-year in the second quarter against forecasts of 7.3% and 4.5% in the previous quarter.
Retail sales grew 3.1% year-on-year to the end of June versus estimates of 3.2% and 12.7% for May.
There were some bright spots though. Industrial production in the world’s second-largest economy expanded by 4.4% year-on-year to the end of June, well above the 2.7% anticipated and 3.5% prior.
Fixed asset investment also grew 3.8% over the January to June period rather than the 3.5% expected.
China’s CSI 300 equity index was down more than 1% but other APAC markets have had a subdued start to the trading week. Tokyo was out for a holiday and typhoon Talim closed markets in Hong Kong as well as Taiwan. Futures are pointing to a slightly negative start to the Wall Street cash session.
G-20 Finance Ministers and central bankers are gathering today in India and while there are likely to be numerous headlines emanating from the conference, we won’t be hearing from any Federal Reserve speakers.
They have gone into a communications blackout ahead of the Federal Open Market Committee (FOMC) meeting on July 26th. The market has almost fully priced in a 25 basis point lift at the conclave.
Crude oil has slipped going into Monday’s session with both the WTI and Brent futures contracts down around 1%. Gold is little changed trading near the middle of its range just above USD 1950.
Several European central bank voting members will be crossing the wires today, including President Christine Lagarde.
The full economic calendar can be viewed here.
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DXY (USD) INDEX TECHNICAL ANALYSIS
The DXY (USD) index made a 15-month low on Friday after breaking below prior support levels in the 100.80 – 101.00 area.
That zone might now become a breakpoint resistance zone ahead of another breakpoint at 101.92, and the peak of 103.57.
The recent sell-off broke below the lower band of the 21-day simple moving average (SMA) based Bollinger Band. A close back inside the band might signal a pause in the bearish run or a potential reversal.
The low on Friday was 99.58 just above the April 2022 low of 99.57. Those levels could provide support ahead of a break point at 99.42.
Chart created in TradingView
— Written by Daniel McCarthy, Strategist for DailyFX.com
Please contact Daniel via @DanMcCarthyFX on Twitter
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