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US Dollar stronger in Asia while markets look for a hawkish Powell


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  • The US Dollar advances against most major currencies. 
  • Traders will hear from US Fed Chairman Powell during his semi-annual testimony. 
  • The US Dollar Index books further gains above 102.50 but faces  nearby resistance.

The US Dollar (USD) is painting a similar picture as seen on Tuesday with yet again a big batch of Asian currencies being outpaced by the Greenback, while European and Scandinavian currencies are rather reluctant to bow for the US Dollar bulls. Biggest loser is the South Korean Won which is losing nearly 1% intraday, followed by the Taiwan Dollar. Throughout the week, housing data is the key theme and Wednesday is no different, with the Mortgage Market Index jumping higher. 

Although there are only two Fed speakers today, one of them will be the most important to listen to this week. US Federal Reserve (Fed) Chairman Jerome Powell is to take the stage in the semi-annual House Financial Service Panel. Powell will try to revamp his hawkish message from last week’s Fed rate pause. The second Fed speaker today will be Federal Reserve Bank of Chicago President Austan Goolsbee, who will speak at a global food forum at 16:25 GMT. 

Daily digest: US Dollar paints a mixed picture

  • A rather mixed picture on the map when looking at the US Dollar performance. A firm stronger USD in Asia with biggest loser the South Korean Won. In Europe and Scandinavia all pairs look rather flat for the day in their performance against the Greenback, while Central-Europe is even taking the upper hand on the US Dollar with Russian Rubble up 0.5% and Polish Zloty gaining 0.25% as biggest gainers while the European session is going into the last few hours of trading for today. 
  • The PBoC fixed its China Yuan weaker against the USD at 7.1795. 
  • The Bank of Japan (BoJ) has released its minutes and committed to its  monetary easing. 
  • Several Chinese media outlets have reported China will bring further interest-rate and Reverse Repo Rate (RRR) cuts this year.
  • On the data front,  US Mortgage Bankers Association (MBA) came out at 11:00 GMT. The Purchase Index jumped to 165.6 from 163.2 previous week. The Mortgage Market Index jumped from 208.8 to 209.8 for the week and the Refinance Index declined from 434.1 to 425.1. The overall Applications for the week declined, but were still positive from 7.2% last week to 0.5% this week. 
  • US Fed Chairman Powell testimony will start at around 14:00 GMT. His speech will be published just minutes before he takes the stage at the House. 
  • The US Treasury is tapping the markets again for a 4-Month bond placement at 15:30 GMT and another 20-year bond placement at 17:00 GMT. 
  • Equities are looking for direction as the US Dollar strength limits any big uprises in European equities for the moment. Biggest loser today for now is China where the Hang Seng closed nearly -2% lower while European stock markets flat. US Equity futures flat for the day. 
  • The CME Group FedWatch Tool shows that markets are pricing in a 79.4% chance of a 25 basis points (bps) interest-rate hike on July 26th, increasing from 74% on Tuesday.  Markets seem to be pricing in just one more hike while all other futures for 2023 are pointing to an unchanged rate level. The market is challenging the view of the Fed’s Dot-Plot curve, which showed most Fed members see two more hikes this year. 
  • The benchmark 10-year US Treasury bond yield trades at 3.74%, lower than the 3.82% seen on Tuesday. Investors are parking their money in bonds, pushing bond prices higher and driving bond yields lower. 

US Dollar Index technical analysis: Hawkish Powell to push DXY to 103

The US Dollar is not showing a unified front against most currencies as a clear regional effect can be defined. The Greenback is advancing in Asia, while losing ground in Central Europe and being unphased in Europe and Scandinavian countries. This results in the US Dollar Index (DXY)  unable to advance higher, but still hold on to gains around 102.50. A break above Tuesday’s high at 102.78 would see more US Dollar strength toward the end of this week. 

On the upside, the 55-day Simple Moving Average (SMA) at 102.57 should be flipping back into support in case US Dollar bulls are able to trigger a daily close above. Should the DXY recover further today or this week, look for the 103.00 psychological level as the next big challenge to the upside. The 100-day SMA at 103.06 will be key to reach should the DXY want to advance further.  

On the downside, the psychological level near 102.00 is the only element upholding DXY. Once price action starts to reside below it, expect to see another nosedive move toward 100.82. That means a challenge for the low of this year and would imply a substantial devaluation for the Greenback to come. 

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.