US Dollar on Watch
The US Dollar is on watch today as traders brace to receive the latest set of US PMI readings. This morning, heavy weakness in euro area PMIs saw ERU collapsing as October ECB easing expectations ballooned. That weakness is helping keep USD better bid ahead of the data. However, should today’s US data undershoot forecasts too, focus will likely shift back to Fed easing expectations. Powell warned traders last week not to expect further .5% rate cuts, saying that there is no set-in-stone path for Fed policy adjustments. However, if data continues to trend lower, expectations of further, aggressive easing, are likely to lead USD lower near-term.
US PMI Forecasts
Looking at the forecasts for today’s data, the market is expecting the August manufacturing PMI to print 48.6, up from 47.9 prior. The services PMI is expected to print 55.3 from 55.7 prior. If seen, data in the region should limit upside in USD. However, if data falls below forecasts, USD looks vulnerable to a strong push lower. Finally, if we see any upside surprise today, that should see current USD buying extending through the first part of the week as traders await Consumer Confidence data tomorrow.
November Fed Pricing
Currently, the market is pricing in only a 50% chance of a further Fed cut in November. As such, there is plenty of room for USD to turn lower if incoming data shows further softness, pushing rate-cut pricing higher.
Technical Views
DXY
For now, the index remains tightly congested around the 100.93 level. Price has remained around current level since late August and given the prior downtrend, focus is on an eventual break lower with 99.67 the next support to note. Topside, bulls need to get back above 102.46 and the broken bull trend line to alleviate near-term bearish risks.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.