The Decline of USD Continues Amidst Consumer Confidence Drop
The decline of the USD persisted as the US conference board consumer confidence unexpectedly fell, leading to the DXY being last seen at 100.49, as noted by OCBC’s FX strategists Frances Cheung and Christopher Wong.
Market Response to China’s Support Measures
- China’s implementation of support measures led to a risk-on mood in the markets.
- Sharp gains in the RMB fueled momentum in AXJs and spurred gains in DM FX, including AUD and EUR.
Technical Analysis: What to Watch For
Daily momentum is currently flat, while the RSI has fallen. An interim double-bottom pattern seems to be forming, prompting a close watch on price action.
Key Levels to Monitor
- Resistance at 101.10 (21 DMA) and 101.90
- Support at 100.20 levels (interim double bottom)
Potential Scenarios
If there is a decisive break below 100.20, the focus shifts to 99.60 and 99.10 levels. This week, market participants are advised to keep an eye on key economic indicators:
- Initial jobless claims (Thu)
- Core PCE (Fri)
Attention should also be paid to any unexpected rebounds in core PCE, as this could trigger concerns about second-round inflation and potentially lead to a bounce in the USD. Additionally, investors should be prepared for a series of speeches by Fed officials, including Powell’s pre-recorded speech on Thursday.
Analysis and Outlook
The current market conditions highlight the importance of staying informed and agile in response to economic data releases and central bank communications. As the USD continues its decline, investors should be prepared for potential shifts in market sentiment and volatility.