Dollar Treading Water Ahead of NFP Release
Dollar Muted For Now
USD volatility has dried up over the last two weeks with the DXY trading a roughly .6% range since May 15th. This has obviously had knock on effects for the wider FX market with the CVIX index (currency volatility) falling 6.0 for the first time in over two years. The big driver behind the current stagnation is the lack of clarity over the Iran war. It feels as though we’ve been caught in a loop recently of news that negotiations are getting close to a deal, followed by news that negotiations are stalling. More recently, the return of tit-for-tat attacks between the US and Iran (while the ceasefire is still intact) has further complicated the picture. For now, it seems that until we get a clear signal that a deal is coming, or the ceasefire collapses and we see a return to full war, DXY is likely to remain rangebound as traders refrain from committing to a directional play.
Better US Data
On the data front, we saw a stronger-than-forecast ISM manufacturing print yesterday which jumped to 54 from 52.7 prior, above the 53.3 the market was looking for. Focus now turns to the JOLTS jobs number later today, expected unchanged at 6.87 million. Recent US data strength is supporting the view that growth is reaccelerating, further strengthening the hawkish Fed outlook. Any improvement in today data could therefore help push DXY a little higher ahead of Friday’s headline labour market report.
Technical Views
DXY
For now, the index continues to hold around the 99.15 level. While still above the broken bear trend lines, focus is on a fresh push higher with 100.36 the key target for bulls. To the downside, 98.24 is the next support to note, with the retest of the broken trend line below.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.