DXY Under Pressure

The US Dollar is starting the week on a softer footing as a recent run of cooler US data sees near-term Fed tightening expectations fall back. Market pricing for a September hike from the Fed has dropped to around 30% from almost 70% at the start of the month. Friday’s weaker-than-forecast US retail sales data was the main catalyst for the shift lower in tightening expectations which had already been weakening in response to prior soft activity data.

FOMC Mins On Watch

Looking ahead this week, focus will be on the minutes of the July FOMC meeting due on Wednesday. While the meeting had a hawkish skew, given the 9-3 vote (most divided Fed voting split since the 90’s), the press conference following the meeting was confusing at best, leading to a sell off in longer dated US T notes. As such, risks into the minutes appear evenly split. While some hawkish support is likely to be expressed (given the voting split), we should also hear some strong push back against the case for tightening which could see USD softening further this week. Beyond that, US PMI data later in the week will be on watch, along with Philly Fed data and weekly jobless claims.

Technical Views

DXY

The sell off in the index has seen price testing below the bull channel once again, putting focus back on a test of the 99.15 level next. With momentum studies bearish, risks remain pointed lower with 98.24 the next support level to watch. Bulls need to see price quickly back above the 100.18 level to alleviate near-term bearish risks.