Dollar selling sends DXY near 2020 peak
As things stand, the trend is bearish for the dollar, but the Dollar Index (DXY) is testing some major long-term levels here as can be seen on the chart. It wouldn't surprise me if the dollar were to start a new up leg here soon, especially given the bullish seasonality factor - USD tends to rise early in the year, with Q1 typically being its the strongest period.
In terms of a bullish trigger, this week's CPI release on Thursday or Jerome Powell's speech on Tuesday both have the potential to move the dollar sharply again, after a double whammy of bearish news sent the greenback tumbling on Friday.
Given that analysts are expecting CPI to rise by only 0.1% m/m, there is the potential for a positive surprise.
On Friday, the US dollar was hit by a double whammy of bearish news, and the response has been a swift one. The weakness in wages and soft services PMI data both point to subdued economic activity, reducing the need for the Fed to hike rates aggressively to tame inflation.
Will the Fed Chair acknowledge this on Tuesday, or once again talk up inflation risks?
It is also worth pointing out that much of this peak rate hike sentiment has already been priced in, so let’s see how much further the sellers will punish the dollar.
My feeling is that the dollar will make a comeback, not least because the economic situation outside of the US is not great either. But the dollar bulls will need to see that reversal stick before stepping in, especially in light of Friday's big sell-off and some follow-up selling so far today. .
In terms of a bullish trigger, this week's CPI release on Thursday or Jerome Powell's speech on Tuesday both have the potential to move the dollar sharply again, after a double whammy of bearish news sent the greenback tumbling on Friday.
Given that analysts are expecting CPI to rise by only 0.1% m/m, there is the potential for a positive surprise.
On Friday, the US dollar was hit by a double whammy of bearish news, and the response has been a swift one. The weakness in wages and soft services PMI data both point to subdued economic activity, reducing the need for the Fed to hike rates aggressively to tame inflation.
Will the Fed Chair acknowledge this on Tuesday, or once again talk up inflation risks?
It is also worth pointing out that much of this peak rate hike sentiment has already been priced in, so let’s see how much further the sellers will punish the dollar.
My feeling is that the dollar will make a comeback, not least because the economic situation outside of the US is not great either. But the dollar bulls will need to see that reversal stick before stepping in, especially in light of Friday's big sell-off and some follow-up selling so far today. .
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