The US dollar is resting near all-time highs as markets analyze the Fed’s stance. New peak for DXY?

US Dollar, DXY Index, Crude Oil, Natural Gas, PBOC, CNY – Talking Points

  • US dollar targets pristine peak as Fed hawks back message
  • PAAC-Shares were mixed on local data and a surprise CNY fixing rate
  • Energy markets look choppy despite strong storage data

The US Dollar has stabilized near record highs in many currency pairs as it appears the dust has started to settle after the Jackson Hole symposium last week.

Overnight, Neel Kashkari, Chairman of the Minneapolis Federal Reserve said markets misunderstood the Fed’s determination to bring inflation back toward 2% after their July Federal Open Market Committee meeting. He said he was “happy to see how President Powell’s Jackson Hole speech was received.” Stock markets are much lower.

Further Fed tightening will begin in September, with an acceleration of the Fed balance sheet liquidation. US$90 billion of treasury bills and mortgage-backed securities (MBS) will be allowed to mature and the funds will not be reinvested each month starting Friday.

The People’s Bank of China (PBOC) pegged the yuan (CNY) stronger than market expectations for the fifth straight day today at 6.8802. The mainland CSI 300 and Hong Kong’s Hang Seng indices are lower, around -0.90% and -0.50% respectively.

The Australian ASX 200 and Japanese Nikkei 225 exchanges recovered some of Monday’s losses. Australia recorded disappointing data on building approvals, slipping -17.2% month-on-month in July. Meanwhile, Japanese employment figures for the same month were in line, with the unemployment rate stable at 2.6%.

European prices for natural products fell after Germany announced that its gas storage filling the 80% target is two months in advance schedule, with reserves now at 79.4%.

Britain’s Chancellor of the Exchequer Nadhim Zahawi commented overnight on the need to do more to help households cope with soaring electricity bills. The pound continues to languish near two-year lows.

Crude oil found support ahead of the North American close after Gazprom announced unscheduled maintenance would be carried out from Wednesday on the Nord Stream pipeline. It eased during the Asian session, with the WTI futures contract below US$97 billion while the Brent contract is slightly above US$104 billion.

After European CPI numbers and UK mortgage approvals, the US will see consumer confidence data.

The full economic calendar can be viewed here.

TECHNICAL ANALYSIS OF THE DXY INDEX (USD)

The US Dollar remains close to Monday’s 20-year high as the DXY index sits in an ascending trend channel.

The price continues to trade mostly in the short, medium and long term simple moving average (SMA)which also display positive gradients. This could indicate that bearish momentum may be unfolding.

Resistance could be at the recent high of 109.48 while support could be at the breakout points of 107.43 and 106.93.

Chart vscreated in TradingView

— Written by Daniel McCarthy, Strategist for DailyFX.com

To contact Daniel, use the comments section below or @DanMcCathyFX on Twitter

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