The U.S. Dollar Index (DXY) has risen by 0.15%
this week, reaching 101.85 points, while the EUR/USD has dipped by 0.10% to
1.10340. The Dollar experienced a significant strengthening last week,
recovering nearly all the losses incurred following Federal Reserve (Fed)
Chairman Jerome Powell's speech in Jackson Hole.
The EUR/USD closed last week at 1.10440, which
is 1.4% below a 13-month high of 1.12000 set the week before. The pair is
approaching a critical threshold at 1.10000, which could determine the market’s
future direction.
Three major events are on the horizon in
September. First, the U.S. labour market report for August will be released
this Friday. Following that, inflation data for August will be published, and
finally, the Fed is expected to hold a meeting where an interest rate cut is
anticipated. Even large investors are feeling uncertain; they participated in
the recent decline and subsequent recovery of the Dollar, investing $39.9
million in the WisdomTree Bloomberg U.S. Dollar Bullish Fund (USDU) during the
third week of August. However, last week saw profit-taking, with the USDU
reporting net outflows of $17.2 million. Despite this, many still believe the
Greenback is oversold, hoping for further strengthening.
Macroeconomic data is supportive of the
Dollar. The U.S. Q2 GDP was revised upward to 3.0% quarter-on-quarter. Upcoming
macroeconomic releases are also expected to be positive. Manufacturing PMI is
forecasted to rise, while Services PMI is expected to remain neutral.
Employment in the U.S. is projected to increase in August, with a consensus of
164,000 new jobs being created. Goldman Sachs (GS) estimates that Nonfarm
Payrolls could rise even further to 185,000, and unemployment could decline to
4.2% from 4.3% in July.
Historically, September has been a positive
month for the Dollar on average. The U.S. Dollar strengthened by 2.4% in
September 2023 and by 2.7% in 2022. Each time, the Dollar's mid-September rise
was double the increase seen by the end of the month, indicating high
volatility during September. Considering these historical trends, the EUR/USD
could drop below 1.10000 in September, potentially reaching the 1.07000-1.08000
range.
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