Quiet Start For Dollar Despite Oil Moves
Dollar muted on Monday
The US Dollar is trading in a rather subdued fashion at the start of the week, somewhat surprisingly given the run up we’ve seen in oil. Escalating hostilities between the US and Iran are the key focus point at the start of the week and should be fuelling stronger support for USD here. DXY remain down from YTD highs having drifted lower from late June and the lack of upside reaction to Middle East developments over the weekend suggests that focus is still on the recent softening of US rate-hike expectations following last week’s inflation undershoot. Pricing for a hike by year end dropped to around 70% from 95% ahead of the data, reflecting the growing conversation around the inflation outlook and Fed expectations in line with the 30% drop in oil prices over June.
Shifting Inflation Outlook
However, the picture has become more complicated by the resurgence in oil prices in recent weeks. Indeed, rate-hike pricing has crept back up in recent days, now back up around the 80% mark. If crude prices continue to push higher this could turn the inflation more firmly hawkish once again, creating fresh demand for USD. An absence of key US data this week will keep focus on Middle East headlines with flash PMI data on Friday the only notable release.
Technical Views
DXY
For now, DXY remains within the bull channel, underpinned by the 100.18-level support. While that level holds, focus is on a fresh push higher and a continuation of the bull channel with 101.91 the first test ahead of the higher 103.20 target.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% and 73% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Futures and Options: Trading futures and options on margin carries a high degree of risk and may result in losses exceeding your initial investment. These products are not suitable for all investors. Ensure you fully understand the risks and take appropriate care to manage your risk.
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.