Tough Level for USD Buyers to Break the 101 in DXY
The US Dollar Index DXY was trading around last week’s lows earlier this week, but in the last two days, the DXY has made a reversal higher, crossing the 100.00 point mark. The USD performance has been influenced by mixed data out of the US this week, which has provided some support after the crash last week. Surprisingly, the dollar has held its ground despite the expectation of further selling pressure.
The retail sales data for June released earlier this week showed a headline figure below estimates. However, it is essential to consider the control group, which excludes volatile components, as it came in above forecasts, indicating a 0.6% MoM growth. On the other hand, industrial production was a concern, falling more than expected, providing additional evidence of a slowdown in the US economy. The Philadelphia FED business index also dipped further this month, but the 6-month index improved instead.
Philadelphia FED Business Index for July 2023
- July manufacturing business index -13.5 vs -10.0 expected
- 11th consecutive negative month for the Philly Fed index
- Six-month index +29.1 versus +12.7 last month
- Capex index +8.6 versus +9.9 last month
- Employment index -1.0 versus -0.4 last month
- Prices paid +9.5 versus +10.5 last month
- New orders -15.9 versus -11.0 last month
There has been an ongoing pickup in the six-month index, in a sign that manufacturers are seeing stabilization, if not a pickup in business.
Currently, various economic indicators are pointing to a slowdown in the US economy, with employment data being one of the few sectors that is showing resilience. Unemployment improved over the past month, with a decrease of 0.1% in the unemployment rate to 3.6%, and average hourly earnings remained strong. So, the USD made a reversal higher in the last two days, after a few doji candlesticks at the bottom, which signaled this reversal.
Although buyers failed to push above the 101 points level which means that the support just below this level might be turning into resistance. But we will follow the price action to see if the breaks occurs and if it does, we will turn bullish on the USD, otherwise we will remain bearish.
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