Renowned FX strategist Chris Turner observes a gentle decline in the US Dollar (USD) amidst calm market conditions.
With the DXY index inching towards 101, the prevailing uncertainty revolves around whether the dollar is nearing the lower end of its medium-term range, poised for a rebound, or signaling a significant downward breakout. Market speculation indicates neutral positioning in key pairs like EUR/USD and USD/JPY, hinting at investor anticipation for the next market catalyst.
Reflecting on recent USD performance, Turner favors a bearish outlook as the Federal Reserve hints at an impending rate cut in September. Notably, the DXY’s trading below the August 5th low and the two-year US swap rates remaining elevated at 3.82% compared to early August levels by 40 basis points.
Anticipating potential downward revisions in the US employment data, particularly with the Bureau of Labor Statistics set to release provisional benchmark revisions soon, Turner foresees a continued softness in the dollar. Resistance is expected around 102.15/102.25, with a bias towards 101 for the DXY index.
Analysis:
The US Dollar’s current trajectory suggests a bearish trend as market conditions remain subdued. With the Federal Reserve signaling a potential rate cut and upcoming revisions to employment data, investors should prepare for further weakening of the dollar. Resistance levels around 102.15/102.25 could cap any potential rallies, with a downward bias towards 101. It is crucial for investors to monitor these developments closely and adjust their portfolios accordingly to navigate the evolving market landscape effectively.