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US Dollar remains unattractive, OPEC+ panel confirms 1.66 million bpd output cut


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  • US Dollar finds it difficult to keep its footing following a bullish start to the week.
  • EUR/USD bullish bias stays intact as the pair holds above key support area.
  • ISM Manufacturing PMI survey is forecast to reveal an increase in input inflation.

Following the rebound witnessed on Friday, the US Dollar (USD) started the new week on a bullish note and the US Dollar Index (DXY) recovered toward 103.00 during the Asian trading hours. Market participants reassess the US Federal Reserve’s (Fed) rate outlook amid renewed concerns over energy inflation turning uncomfortably high. The ISM’s Manufacturing PMI survey could impact the USD valuation in the second half of the day on Monday. Ahead of this data, the DXY has lost its traction and turned negative on the day below 102.50.

Daily digest market movers: US Dollar awaits ISM Manufacturing PMI report

  • The CME Group FedWatch Tool shows that markets are pricing in a nearly 60% probability of the Fed raising its policy rate by 25 basis points (bps) in May, compared to 48% on Friday. 
  • On Sunday, Saudi Arabia announced that several producers in OPEC+ will participate in voluntary output cuts from May to the end of the year. The group’s total output will be reduced by more than 1 million barrels per day in that period.
  • OPEC+ panel confirmed following Monday’s meeting that the total output cut will be 1.66 million barrels per day.
  • The barrel of West Texas Intermediate (WTI) opened with a large bullish gap and touched its highest level since late January above $82.
  • The ISM Manufacturing PMI survey is forecast to show ongoing contraction in the business activity of the United States (US) manufacturing sector in March.
  • Prices Paid Index of the PMI survey is expected to 53.8 in March from 51.3 in February. 
  • Previewing the ISM survey, “if the headline figure beats estimates, the US Dollar would rise and stocks would decline as investors would give a higher chance to a rate hike in May,” said FXStreet Analyst Yohay Elam. “However, any such move would be short-lived. Even if the Fed were to raise borrowing costs next month, it would probably be the last.” 
  • NY Fed President John Williams reiterated on Friday that the Fed’s policy decisions will be driven by the incoming data and the progress toward employment and price stability mandates.
  • Later in the week, the ISM Services PMI survey, ADP private sector employment data and the US Bureau of Labor Statistics’ March jobs report could influence the USD valuation. 

Technical analysis: US Dollar to stay fragile against Euro

Despite the modest retreat witnessed at the beginning of the week, EUR/USD remains bullish in the near term. The Relative Strength Index (RSI) indicator on the daily chart stays near 60 and the pair holds comfortably above the 20-day and the 50-day SMA, which are about to make a bullish cross. 

On the upside, EUR/USD faces first resistance at 1.0900 (psychological level, static level). If the pair manages to rise above that level and confirms it as support, it could extend its uptrend toward 1.1000 (end-point of the latest uptrend) and 1.1035 (multi-month high set in early February).

EUR/USD’s latest pullback confirmed 1.0800 (psychological level, static level) as support. A daily close below that level could open the door for further losses toward 1.0730 and the 1.0650/60 area, where the 100-day SMA and the Fibonacci 23.6% retracement of the latest uptrend align.

What is US Dollar Index (DXY)?

The US Dollar Index, also known as DXY or USDX, is a benchmark index that was established by the US Federal Reserve in 1973. DXY is widely used as a tool measuring the US Dollar (USD) value in global markets. The index is calculated by measuring the US Dollar’s performance against a basket of six foreign currencies, the Euro, the Japanese Yen (JPY), Swedish Krona (SEK), the British Pound (GBP), the Swiss Franc (CHF) and the Canadian Dollar (CAD).

With 57.6%, the Euro has the biggest weight in the index followed by the JPY (13.6%), GBP (11.9%), CAD (9.1%), SEK (4.2%), and CHF (3.6%). Hence, a sharp decline in the EUR/USD pair could help the US Dollar Index rise even if the US Dollar weakens against some of the other currencies in the basket.