US Dollar puzzled after Fed's Kashkari calls for at least another year of steady rates

• The US Dollar overcomes brief deep on the back of weaker US data. 
• Fed's Kashkari paints a gloomy view in terms of timing before inflation is back in range. 
• The US Dollar index jumps back to near 105.50.

The US Dollar (USD) is seeing its earlier gains from the ASIAPAC session being trimmed back after softer Jobless Claims data and even worse Housing data. Another data point from the Housing Sector that is pointing to easing or softening in the sector. Add in there the uprise in Continuing Claims, where rather a decline was expected, and again the US Dollar is not really convincing here in terms of performing data. 

On the US economic data front, only the US Federal Reserve speakers ahead. Although not that much is expected because recent messages were already quite hawkish. How much more hawkishness can you add? There is a limit and looks that that limit has been reached; with markets being fed up receiving the same hawkish message for weeks from Fed officials. 

Daily digest market movers: Kashkari adds to hawkishness

• An eventful Asia-Pacific session triggered substantial moves in the Forex space:
  • The People’s Bank of China (PBoC) has let loose its daily fixing, weakening to a fresh low for 2024 against the US Dollar. 
  • The New Zealand Dollar (NZD/USD) advanced substantially against the Greenback after the country’s economy expanded by 0.2% in the first quarter, which means the country is out of its brief technical recession. 
  • Asian equities rolled over with concerns that the Chinese economy might be doing worse than markets anticipated, seeing the actions from the PBoC to devalue its currency. 
• A big batch of data was released at 12:30 GMT:
  • May’s Building Permits and Housing Starts:
    • Building Permits misses estimates and fell back from 1.44 million to 1.386 million. 
    • Housing Starts also declined, missing upbeat estimates, by heading from 1.352 million to 1.277 million. 
  • Weekly Jobless Claims:
    • Initial Claims went from a revised 243,000 to 238,000.
    • Continuing Claims jumped from 1.813 million to 1.828 million people out of a job. 
  • The Philadelphia Fed Manufacturing Survey for June missed the mark as well and came in at 1.3, coming from 4.5 and missing the consensus of 5.
• Two US Federal Reserve Speakers to look out for was well this Thursday:
  • At 12:45 GMT, Federal Reserve Bank of Minneapolis President Neel Kashkari participated in a fireside chat as part of the Michigan Bankers Association Annual Conference. Kashkari said that it might take up to a year or even two year before inflation is back to 2% target. Wage growth is still to high to get their quicker, Fed's Kashkari commented. 
  • Near 20:00 GMT, Federal Reserve Bank of Richmond President Thomas Barkin participates in a conversation and Q&A session about the economic outlook at the Richmond Risk Management Association.
• Equities are still in good tone to snap the negativeness from the Asian trading session. European equities are holding on to gains while US futures are up near 0.50% ahead of the US opening bell. 
• The CME Fedwatch futures for September are further backing in a rate cut, with odds now standing at 59.5% for a 25 basis point cut. A rate pause stands at a 34.1% chance, while a 50-basis-point rate cut has a slim 6.4% possibility. 
• The US 10-year benchmark rate is trading at 4.28%, ticking up from the 4.24% earlier this Thursday and after the comments from Fed's Kashkari. 

US Dollar Index Technical Analysis: Not so data dependent

The US Dollar Index (DXY) is putting up a heavy fight, with a bit of a thank you to the Asian uncertainty after the PBoC let loose its stronger Yuan fixing. With concerns growing that there might be something brewing in China with more monetary policy coming in, some slumbering support for the DXY could linger on and limit any substantial downturns. 

On the upside, there are no big changes to the levels traders need to watch out for. The first is 105.52, a barrier that held during most of April. The next level to watch is 105.88, which triggered a rejection at the start of May and will likely play its role as resistance again. Further up, the biggest challenge remains at 106.51, the year-to-date high from April 16. 

On the downside, the trifecta of Simple Moving Averages (SMA) is still playing as support. First is the 55-day SMA at 105.14, safeguarding the 105.00 figure. A touch lower, near 104.61 and 104.48, both the 100-day and the 200-day SMA are forming a double layer of protection to support any declines. Should this area be broken, look for 104.00 to salvage the situation.