US Dollar continues its decline as China speeds up stimulus

• US Dollar outmatched by Asian currencies on Tuesday after PBoC announces more support packages.
• Except for some second-tier data points, all eyes are on Saint Louis Fed President James Bullard. 
• The US Dollar Index continues its decline for a fourth consecutive day. 

The US Dollar (USD) is continuing its slide against nearly every major currency on Tuesday. The biggest descent comes on the back of the People’s Bank of China (PBoC) latest decision which is stepping up its stimulus and rescue packages for the construction sector. The support is being applauded in the region and has pushed Chinese stocks higher while Asian currencies are in demand against the Greenback. 

Out of the economic data calendar no real big events that could trigger a sudden turnaround in the tone for the US Dollar. The National Federation of Independent Business (NFIB) is to issue its Optimism Index for June at 10:00 GMT, which is expected to remain elevated at 89.9. Interesting to see after the NFIB print, will be the Economic Optimism Index from the TechnoMetrica Institute of Policy and Politics (TIPP) in order to get confirmation if there really is an uptick or rather a decline in economic sentiment. That number is expected at 14:00 GMT, and comes after the speech of James Bullard, the President of the Federal Reserve Bank of St. Louis, at 13:00 GMT.

Daily digest: US Dollar loses ground in Asia

• China will accelerate the roll-out of its policy to aid the property sector, the Chinese Yuan is rallying on the back of it. 
• Around 10:00 GMT, the National Federation of Independent Business (NFIB) will release its Optimism Index for June with expectations coming in at 89.9, a small jump from 89.4 previous.
• James Bullard is expected to speak at 13:00 GMT. After already a slew of hawkish comments from his fellow Fed members, it will be good to hear if Bullard is still in the hawkish camp and confirm if more hikes are needed.  
• A similar index as the NFIB, but this time from the Economic Optimism Index from the TechnoMetrica Institute of Policy and Politics (TIPP), will be published at 14:00 GMT. Consensus here points to a jump as well from 41.7 previous to 45.3.
• The US Treasury is set to access the markets as well in order to allocate a 1-year and a 3-year bond auction.  
• The Japanese Topix index was too late to enjoy the positive tone in Asia and closed at -0.31%, nearly flat for this Tuesday, while the Chinese Hang Seng soared higher and closed near 1% of gains. European equities fell back after another negative print from Germany’s Zentrum für Europäische Wirtschaftsforschung GmbH (ZEW) print and is near flat while US equity futures are mildly in the red.
• The CME Group FedWatch Tool shows that markets are pricing in a 92.4% chance of a 25 basis points (bps) interest-rate hike on July 26. Chances of a second hike in November are down to 26.7%. It appears that markets are pricing out again the possibility of a second rate hike and presume that the Fed will hike in July for the last time. Markets expect US Fed Chairman Jerome Powell to announce that the pivotal level has been reached at the yearly Jackson-Hole Symposium between August 24 and 26 in Kansas. 
• The benchmark 10-year US Treasury bond yield trades at 3.97% and is continuing its slide lower from 4.09% last week. Traders are again doubling down on whether there will be more than one rate hike from the Fed. 

US Dollar Index technical analysis: More downside looks inevitable

The US Dollar is continuing its decline for a fourth straight day in a row as this time Asian currencies are overpowering the Greenback. During European trading hours, the US Dollar was down nearly 0.50% against the Japanese Yen (USD/JPY), the South Korean Won (USD/KRW) and the Chinese Yuan (USD/CNY). The support and demand for Asian currencies comes from China, where the government will speed-up its promised support packages for the much battered construction sector. This boosted the belief for a speedy recovery in China and made the US Dollar Index (DXY) retreat for another day. 

On the upside, look for 102.811 at the 55-day Simple Moving Average (SMA), that will have regained partially its importance after having been chopped up that much a few weeks ago. Only a few inches above the 55-day SMA, the 100-day SMA comes in at 102.96 and could create a firm area of resistance in between both moving averages. In case the DXY makes its way through that region, the high of July at 103.57 will be the level to watch for a further breakout. 

On the downside, the only thing in the way to stop the DXY from hitting 101.00 is the psychological handle at 101.50. Once that level is breached, not many relevant levels to look for as it will become a quick decline to 101.00 and start testing the lows of May. Special notice for 100.75 as that level is a floor since February 2nd and could open the door for a slide below 100.00 one broken through it.