The US Dollar Gains Strength on Powell’s Comments
- Fed Chairman Powell’s comments overnight contribute to the US Dollar’s positive performance.
- Israel’s ground offensive in Lebanon raises tensions in the region.
- The US Dollar Index reaches a four-day high ahead of ISM Manufacturing PMI data release.
The US Dollar (USD) is trading positively on Tuesday as traders anticipate the Manufacturing Purchasing Managers Index (PMI) data release from the Institute for Supply Management (ISM). This uptrend follows Chairman Jerome Powell’s comments, which suggest fewer interest rate cuts from the Federal Reserve (Fed).
Geopolitically, Israel’s incursion into Lebanon has escalated tensions, potentially triggering safe-haven flows that could support the USD.
Focus shifts to the ISM Manufacturing survey as the main market driver on Tuesday, with additional attention on other economic indicators:
Key Market Movements
- Fed Chairman Powell’s data-driven policy approach influences market sentiment.
- Israel’s targeted ground offensive in Lebanon and regional tensions impact market dynamics.
- The final reading of the S&P Global Manufacturing PMI for September is expected to remain unchanged.
- ISM Manufacturing data for September includes an anticipated increase in the headline PMI and subindex fluctuations.
- Other events include the JOLTS Job Openings report and appearances by Fed members.
Market Analysis and Outlook
- European equities await direction amid uncertainty surrounding potential ECB rate cuts.
- US Futures trade flat ahead of the US market open.
- The CME Fedwatch Tool indicates market expectations for the next Fed meeting.
- The US 10-year benchmark rate hovers around 3.75%, nearing a three-week high.
US Dollar Index Technical Analysis
The US Dollar Index (DXY) benefits from Powell’s comments, reducing expectations of a significant rate cut in November. This support for the USD weakens other currencies in the DXY basket, such as the Euro (EUR).
The DXY’s recovery is evident as it surpasses previous daily highs, with resistance levels and potential downside targets in focus:
- Resistance: 101.90 and 102.22 (55-day SMA).
- Support: 100.62 (turning into support) and 100.16.
Banking Crisis FAQs
- Overview of the Banking Crisis of March 2023.
- Impact on interest rate expectations and the US Dollar.
- Analysis of Gold’s performance during the crisis.