As the US Dollar (USD) short squeeze continues, currencies such as AUD, NZD, and THB are feeling the pressure, according to OCBC FX strategists Frances Cheung and Christopher Wong.
Potential Risks Ahead
The recent ISM manufacturing data showed a slump, with new orders and employment subindex remaining in contractionary territory. All eyes are now on the upcoming JOLTS job openings and the Fed’s Beige Book report. While the July Beige Book indicated some positive trends in employment across various districts, the focus remains on supporting the labor market.
Market analysts suggest that the USD is likely to be sensitive to job data releases this week, with both positive and negative data potentially triggering a rebound in the currency. The current DXY stands at 101.61, with daily momentum showing mild bullish signals but with a moderated rise in RSI.
There are still some concerns about a further short squeeze in the USD, with resistance levels at 101.90 and 102.20, and support at 100.50. Key events to watch out for this week include JOLTs job openings, ADP employment data, ISM services employment figures, and the US payrolls report.
Analysis and Implications
For investors and individuals following the financial markets, the ongoing USD short squeeze and its potential impacts on other currencies can have significant implications. Any further strengthening of the USD could impact global trade, inflation rates, and overall market sentiment. It is important to stay informed about upcoming economic data releases and central bank announcements to make informed decisions about your investments.