US Dollar Mixed On Monday As Debt Ceiling Talks Stall, Asian Currencies Bite Back

The US Dollar (USD) shows a very mixed picture this Monday, with two clearly defined regions explaining why the US Dollar Index (DXY) is going nowhere. The US Dollar is gaining against most G7 currencies, except Asian pairs such as the South Korean Wong (KRW) and the Japanese Yen (JPY), which are gaining traction against the Greenback. The Asian currency rise comes after several headlines from the PBoC, South Korean trade data, and Japanese Machinery Orders. 

On the macroeconomic data front, traders will be mulling the progress on the United States debt ceiling talks after a brief hiccup over the weekend, when further discussions got canceled by the Republicans as they walked away from the negotiating table. Meanwhile, US President Joe Biden has restored the situation, and talks began again on Sunday. This week, several important US macroeconomic data will be released. They could significantly impact the US Dollar, withPMI numbers on Tuesday and Durable Goods and the PCE Price Index, which is the Fed’s preferred inflation metric, leading the way on Friday. 

Daily Digest: US Dollar To Float Between Debt Ceiling Talks And Macroeconomic Data

  • Indices globally took a turn to the downside at the start of the Asian session on Monday, where the Asian index was able to create a turnaround and print positive numbers. 
  • US President Joe Biden commented on Monday morning out of Japan that calls with US House Speaker and Republican Kevin McCarthy went well and that talks will resume tomorrow. 
  • From his side, McCarthy reiterated that talks would not progress as long as President Biden had not returned to the US. 
  • Over the weekend, US Treasury Secretary Janet Yellen threw a small spanner in the works by saying that the US Treasury has a pretty low probability of being able to pay its bills by June 15.
  • On Friday, US Fed Chairman Jerome Powell attended a panel discussion with former Fed Chair Ben Bernanke. Powell commented that rates may not need to rise as high given the current credit stress. 
  • The CME Group FedWatch Tool shows that markets are flip-flopping again after these comments from Powell on Friday and have priced out a rate hike for June, while an initial rate cut has been delayed until September instead of July. 
  • The benchmark 10-year US Treasury bond yield trades at 3.64% and shows further signs of retreat after peaking at 3.71% on Friday. This could allow for some US Dollar bearish correction. 

US Dollar Index Technical Analysis: Will The Uptrend Hold?

The US Dollar Index (DXY) has taken out the 55-day and the 100-day Simple Moving Averages (SMA), respectively, at 102.52 and 102.87. For now, the support looks to be holding at 103, and we could see the DXY heading back to challenge 103.61, the high of last Thursday. 

On the upside, 105.79 (200-day SMA) still acts as the big target to hit, as the next upside target at 104.00 (psychological level, static level) acts as an intermediary element to cross the open space.

On the downside, 102.87 (100-day SMA) is the first support level to ensure that. If that breaks down, watch how the DXY reacts at the 55-day SMA at 102.52 to assess any further downturn or upturn. 

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