US Dollar keeps head up high despite increasing headwinds

• US Dollar price action was very choppy on Thursday after the US issued tariffs on tin imports.
• Traders have digested the hawkish Fed Minutes and are looking forward to Jackson Hole next week. 
• The US Dollar Index consolidates near the monthly high and to close this week again in the green.

The US Dollar (USD) is proving to be resilient although a few market participants are trying to push the Greenback from its pedestal. Not only are the BRICS (Brazil-Russia-India-China-South Africa) countries holding a convention to circumvent their dependency from the US Dollar when exchanging commodities, but the Chinese People’s Bank of China (PBoC) has issued its strongest fixing in its existence for the Yuan against the US Dollar. The PBoC tries to stabilise the Yuan to squeeze out speculators against the Chinese currency. 

A very calm Friday on the data front with no real market moving points. This will offer market participants the chance to start preparing for the volatile week ahead, with a lot of data out of Europe and the annual Jackson Hole Symposium as the cherry on the cake. Each year, all the smart minds and souls of biggest central banks over the world meet in Wyoming to debate about monetary policy. This event will bear quite a lot of headline risk as it is often the ideal moment for the US Federal Reserve (Fed) to announce either a change in monetary policy or issue a longer-term commitment on its policy adjustments. 

Daily digest: US Dollar moves sideways 

• The main focus today will be on headlines from the BRICS convention, where the main topic is de-dollarization. 
• Another red day again in equity markets, with Asian equities on their back. The Japanese Topix is about to close this Friday with a 0.70% loss. The stronger Yuan fixing does not help the Hong Kong Exchange, which is down near 2%. Europe is in the red as well, though by less than 0.5%. US futures bear hope for a turnaround, with US futures mildly in the green at 0.1% on average. 
• The CME Group FedWatch Tool shows that markets are pricing in an 88.5% chance that the Federal Reserve will keep interest rates unchanged at its meeting in September. 
• The benchmark 10-year US Treasury bond yield trades at 4.23%, retreating a touch from its peak earlier this week. 

US Dollar Index technical analysis: steady as she goes

The US Dollar is hovering at the monthly high in the US Dollar Index (DXY). The Greenback retreats a touch this Friday, though remains at several three to six-months highs against most major G10 peers. Any sudden headline or squeeze could see fresh highs if the headlines would bear a risk off tone.  

On the upside, 104.00 is the level to head to. The high of July at 103.57 is vital and needs to get a daily close above in order for the DXY to eke out more monthly gains. Should this US Dollar strength persist for the last part of this year, May’s peak at 104.70 could become reality again.   

On the downside, several floors are likely to prevent a steep decline in the DXY. The first one is the 200-day Simple Moving Average (SMA) at 103.26, which got broken very briefly on Thursday. Passing below the 103.00 big figure, some room opens up for a further drop. However, around 102.34 both the 55-day and the 100-day SMA are awaiting to catch any falling knives.