- As of this week, the United States Dollar has recovered for the second day in a row.
- In terms of its monetary policy, the Bank of Japan sent forth contradictory signals.
- This past Wednesday, the US Dollar index gained significantly, surpassing the 103.00 mark.
The United States Dollar (USD) is making a comeback as all asset classes are beginning to rebound to more usual levels. Equity markets are functioning exceptionally well and preserving their stability, while volatility is significantly decreasing. There has been a steady decline in the value of safe haven currencies such as the Swiss Franc (CHF) and the Japanese Yen (JPY) compared to the United States Dollar. Because of the massive loss of more than 1.5% that the Japanese yen has undergone in comparison to the United States dollar, it has become the key reason that is driving the recovery of the United States dollar index (DXY).
Taking into consideration the current state of the economy, it is anticipated that tomorrow will be a reasonably calm day. This would create a climate that is conducive to the markets continuing their upward trajectory. In the domain of interest rates, the 10-year Note auction that the United States Treasury will hold is expected to attract a substantial amount of interest due to the fact that it is a significant benchmark rate. The information about the shift in consumer credit in the United States (US) for June is scheduled to be made publically available on Wednesday.
Market Movers in Today’s Daily Digest: A Lackluster Performance
- The statements made by Shinichi Uchida, a member of the Bank of Japan (BoJ), which suggested that the BoJ would refrain from boosting interest rates in the case of market turbulence, most likely came as a surprise to traders who were trading during the Asian hours. As a first reaction, the value of the yen fell by one percent in comparison to the value of the dollar.
- The most recent Mortgage Application Index was recently made available by the Mortgage Bankers Association at eleven o’clock in the morning GMT. This week’s data suggests a considerable increase with a positive rise of 6.9%, in contrast to the previous figure, which showed a drop of -3.9%.
- The European Central Bank (ECB) can maintain its reduction phase only when there is a further slowdown in inflation, as stated by Dr. Olli Rehn, the Governor of the Bank of Finland and a member of the Governing Council of the European Central Bank (ECB).
- There will be a distribution of a 10-year note on the market by the United States Treasury at 17:00 GMT. On the other hand, the current interest rate for the United States 10-year note is around 3.90 percent, which is a substantial decrease from the prior rate of 4.276%.
- The statistics for the United States Consumer Credit Change for June are planned to be released at 19:00 GMT. Compared to the previous month’s total of $11.35 billion, analysts estimate a decline to $10 billion (down from $11.35 billion).
- A time of prosperity is currently being experienced by the equity markets, as seen by the fact that both the Japanese Nikkei and Topix indices are exhibiting positive advances. Just before the opening bell in the United States, both European and American stock markets increased by more than one percent today.
- The CME Fedwatch Tool indicates that there is a considerable possibility that the Federal Reserve (Fed) would reduce the interest rate by fifty basis points (bps) in September, with the probability now standing at 63.5%. There is a chance of 55.5% that there will be another drop of 25 basis points in November. This is a significant likelihood. Furthermore, there is a 17.5% possibility that a more substantial cut of 50 basis points will be implemented during that meeting, while there is a 27.0% chance that no cut will be implemented during that meeting.
- Currently, the benchmark rate for the 10-year Treasury note in the United States is trading at 3.93%, representing a considerable rise this week. Investing firms have shifted their attention away from bonds and toward equity, which has led to this spike.
The Dollar Is Driven by the Rate Disparity, According to a Technical Analysis of the US Dollar Index
Despite the fact that the Japanese yen is providing support, the United States Dollar Index (DXY) is making headway in its recovery. Upon closer inspection of the specific currency pair (USD/JPY), it becomes apparent that the yen has seen a considerable and quick rise in comparison to the United States dollar. There is no anticipation that the US dollar will decline altogether. Still, there will probably likely be some recovery this week for the US Dollar, which might lead to an increase in trading of the DXY by Friday.
In the present moment, the recovery is in progress, and the first resistance is located at 103.18. This level was kept at the same level on Friday; however, it was breached on Monday during the Asian hours. As of right now, it is being examined on Wednesday. Following the achievement of that level, the subsequent objective is 104.00, which served as a support level in June of this year. In the event that the DXY is successful in regaining that level, the next obstacle that should be monitored is the 200-day Simple Moving Average (SMA), which is located at 104.22.
Regrettably, the RSI indicator on the daily chart, which has been substantially sold, is likely to restrict further severe losses for the DXY.
This is because the indicator has been extensively marketed. A nearby support level is the low that was reached on March 8th, which is now located at 102.35. Following the passage of that point, there will be an increase in the amount of pressure exerted on the 102.00 level, which carries a large amount of psychological weight. The subsequent objective will be to reach 101.90, a significant level that was instrumental in both December 2023 and January 2024 because of its significance.