- The US Dollar trades in the red after very mixed ISM data.
- Markets are in the green with Europe up near 1% and US equities trying to follow.
- The US Dollar Index trades in the mid-104.00 region, though retreats to 104.00 after ISM print.
The US Dollar (USD) trades on the backfoot this Monday with the numbers from the Institute for Supply Management (ISM) as biggest driver for the Greenback weakness. The moves comes after the different data points reveal that there is easing at hand. The job component even fell further into contraction and might be a sign on the horizon that this week's US Jobs Report and its Nonfarm Payroll component might get ugly.
With all data points for this Monday out of the way, traders will start preparing for Tuesday. The Factory Orders and the US JOLTS Job Openings report will confirm wether the that the US jobs market is no longer as tight as traders thought. It becomes clear from already this Monday that this will be a pivotal week for the US Dollar Index (DXY).
Daily digest market movers: ISM split, which is bad news
- Monday’s US calendar kicked off with the release of the final S&P Global Manufacturing PMI for May The final reading came in at 51.3, stronger than the 50.9 number.
- At 14:00 GMT, the Institute for Supply Management released its recent findings from its monthly survey for May:
- The headline Manufacturing PMI index contraacted further from 49.2 to 48.7.
- The Employment Index jumped from 48.6 in April to 51.1 in May.
- The New Orders index fell further into contraction from 49.1 to 45.4.
- The Prices Paid index fell as well, from 60.9 to 57.
- Construction Spending is expected to rise 0.2% in April, swinging from a 0.2% contraction in March.
- Equities are in the green across Europe, while US equities are having some difficulties with the Dow Jones signalling technical issues.
- According to the CME Fedwatch Tool, Fed Fund futures pricing data suggests a 46.1% chance for keeping rates unchanged in September, against a 47.2% chance for a 25 basis points (bps) rate cut and a 6.7% chance for an even 50 bps rate cut. An interest rate hike is no longer considered an option.
- The benchmark 10-year US Treasury Note trades around 4.41%, and heads to the lower end of its monthly range between 4.34% and 4.61%.
US Dollar Index Technical Analysis: End of consolidation this week
The US Dollar Index (DXY) is hanging a bit in no man's land this Monday after its negative performance last week. When looking at a weekly chart, the DXY is clearly in consolidation, posting with lower highs and higher lows as sellers and buyers are being pushed towards each other. In this context, normally a breakout is then set to take place, something that could happen this week taking into account the very busy economic calendar ahead.
On the upside, the DXY index reclaimed the key 105.00 round level, which broadly aligns with the 55-day Simple Moving Average (SMA). It will be important to see if these levels hold support should the US data weaken. Once that is proven, look for 105.52 and 105.88.
On the downside, the 200-day SMA at 104.44 and the 100-day SMA around 104.42 are the last line of defence. Once that level snaps, an air pocket is placed between 104.30 and 103.00. Should the US Dollar decline persist, the low of March at 102.35 and the low from December at 100.62 are levels to consider.
