USD Marches Higher ad DXY Bounces Off MAs

The U.S. dollar has been in demand since early August as the U.S. economy was showing resilience, particularly in the employment sector. In the last two weeks, the data has deteriorated and employment has cooled off in the US as well, although the USD is still finding good demand and buyers are buying dips whenever they have the opportunity.

This comes as a result of the USD becoming a safe haven for investors, who are getting increasingly worried about the global economy, especially in China. The Buck has strengthened significantly against various currencies like the JPY, the Euro, and the GBP, reaching its highest levels in several months.

Risk currencies such as commodity dollars have been suffering from this, with the NZD losing more than 5 cents. The AUD has also declined by a similar amount which also resued again today after the Reserve Bank of Australia decided to keep interest rates unchanged, leading to a 100 pip decline.

Most analysts anticipate that the Federal Reserve will keep interest rates unchanged in the upcoming September meeting. However, there is a divergence of opinions regarding what might happen in the following meetings. While most don’t expect further hikes, the FED has given signals that they might keep rates “higher for longer” which is also pretty hawkish since interest rates are at really high levels.

This uncertainty is occurring against a backdrop of disappointing economic data coming from China and Europe, which is creating a risk-averse sentiment across various global asset classes. In China, the prolonged lockdowns have had their effects on the economy which are showing now, particularly in the real estate sector.

Europe is also falling into a recession, while the Bank of Japan remains very accommodative as inflation slows in Japan which is keeping USD/JPY bullish, as it approaches 148. So there are not many safe places for investors to keep the cash. So, the USD is benefiting from this but let’s see how the ISM services will come out in a while.