English
US Dollar Index: DXY Retreats Towards 103.00 On Friday's Doji; Jackson Hole Fed Remarks Anticipated
US Dollar Index extends Friday's retreat from a 10-week high, maintaining a lower position to halt a five-week uptrend. Mixed concerns regarding Fed Chair Jerome Powell's Jackson Hole speech combine with a light economic calendar to encourage DXY investors. Previously, mostly optimistic US data and a risk-averse sentiment allowed the greenback to remain firmer. Preliminary readings of August PMIs and US Durable Goods Orders are also anticipated to provide unambiguous guidance.
After a five-week uptrend, US Dollar Index (DXY) bulls take a pause as markets appear uncertain about Federal Reserve (Fed) Chairman Jerome Powell's speech at the annual Jackson Hole Symposium. As well as the consolidation of the DXY's previous gains ahead of this week's top-tier data/events, cautious optimism in anticipation of additional stimulus from China is also likely to have pushed the Greenback's index against the six major currencies. In spite of this, the US Dollar Index falls to 103.30 by press time in the early Asian session on Monday, extending its decline from the 2.5-month high from the previous day.
Goldman Sachs anticipates that Fed Chair Powell will adopt a defensive tone during the annual meeting of central bankers, whereas the Bank of America (BofA) anticipates that Powell will fight back against rate cut expectations. The indecisiveness of these institutions may be attributable to recent contradictory US data and previous policy bias.
During the previous week, the positive US NY Fed Manufacturing Index, Retail Sales, and wage growth allowed the DXY to advance for the fifth consecutive week, with the hawkish Fed Minutes providing additional support. Nevertheless, the most recent Fed Minutes revealed that the majority of policymakers favoured supporting the fight against'sticky' inflation, despite being divided on the impending rate increase.
In addition, market participants began to reevaluate prior biases regarding the major central banks and added to the risk aversion, which was primarily fueled by China-related issues. Nonetheless, investors anticipated that the conclusion of the rate hike cycle remains uncertain, resulting in increased bearish pressure on riskier assets and a stampede for the US Dollar.
It is important to note, however, that weekend news from China suggests the dragon nation's increased efforts to infuse liquidity into the world's second-largest economy, which in turn prompted the market's cautious optimism on Monday morning. Wall Street ended Friday with a middling performance, reflecting the prevailing sentiment, while US Treasury bond yields declined following a severely negative week for equities and optimistic bound coupons. As of press time, however, S&P500 Futures remain lacklustre at the monthly low.
A light Monday calendar may enable the DXY to extend the most recent bullish consolidation. However, this week's preliminary readings of the August month Purchasing Managers Indexes (PMIs) and July Durable Goods Orders will occupy US Dollar traders prior to the central bankers' speeches at the annual Jackson Hole Symposium, scheduled for August 24 to 26.
In the event that Fed Chair Powell fails to defend the hawks, the DXY will extend its most recent retreat from the key resistance line.
Bonus rebate to help investors grow in the trading world!
