US Dollar ekes out mild gains as market mood sours

• The US Dollar trades mildly in the green after China fixes its Yuan at the lowest level since November.
• Markets gear up for two data-packed days in the US. 
• The US Dollar index trades broadly sideways, keeping its head above 105.00.  

The US Dollar (USD) trades mildly in the green on Thursday, advancing against most major peers with exceptions such as the Japanese Yen (JPY) and the Swiss Franc (CHF) when it was trading ahead of its Swiss National Bank (SNB) rate decision which triggered a reversal now . The Greenback appears to be supported by the broad risk-off market mood, with traders concerned as the  People’s Bank of China (PBoC) has set the Yuan’s reference rate at 7.1192 against the US Dollar, its weakest level since November. 

On the US economic data front, the schedule resumes after the brief hiatus due to the Juneteenth public holiday. Per usual on Thursday, the weekly Jobless Claims will be on the forefront after numbers started to tick up last week. The Philadelphia Fed Manufacturing Survey will be the second focal point. 

Daily digest market movers: Asia moving markets

• An eventful Asia-Pacific session triggered substantial moves in the Forex space:
  • The People’s Bank of China (PBoC) has let loose its daily fixing, weakening to a fresh low for 2024 against the US Dollar. 
  • The New Zealand Dollar (NZD/USD) advanced substantially against the Greenback after the country’s economy expanded by 0.2% in the first quarter, which means the country is out of its brief technical recession. 
  • Asian equities rolled over with concerns that the Chinese economy might be doing worse than markets anticipated, seeing the actions from the PBoC to devalue its currency. 
• A big batch of data will be released at 12:30 GMT:
  • May’s Building Permits and Housing Starts:
    • Building Permits are expected to tick up to 1.45 million from 1.44 million.
    • Housing Starts should paint a similar picture as the permits, with an uptick from 1.37 million units to 1.36 million.
  • Weekly Jobless Claims:
    • Initial Claims are expected to ease to 235,000 from 242,000.
    • Continuing Claims should abate as well, to 1.81 million from 1.82 million.
    • An uptick in Jobless Claims would mean a second consecutive week of increases, possibly triggering some US Dollar weakness.
  • The Philadelphia Fed Manufacturing Survey for June should tick up from 4.5 to 5.
• Two US Federal Reserve Speakers to look out for was well this Thursday:
  • At 12:45 GMT, Federal Reserve Bank of Minneapolis President Neel Kashkari participates in a fireside chat as part of the Michigan Bankers Association Annual Conference.
  • Near 20:00 GMT, Federal Reserve Bank of Richmond President Thomas Barkin participates in a conversation and Q&A session about the economic outlook at the Richmond Risk Management Association.
• Equities are rolling over with red numbers across Asia. European and US futures are snapping that negativeness and are in the green after the European opening bell.
• The CME Fedwatch futures for September are further backing in a rate cut, with odds now standing at 59.5% for a 25 basis point cut. A rate pause stands at a 34.1% chance, while a 50-basis-point rate cut has a slim 6.4% possibility. 
• The US 10-year benchmark rate is trading at 4.24%, right in the middle of this week’s range. 

US Dollar Index Technical Analysis: It never was going to be easy

The US Dollar Index (DXY) is putting up a heavy fight, with a bit of a thank you to the Asian uncertainty after the PBoC let loose its stronger Yuan fixing. With concerns growing that there might be something brewing in China with more monetary policy coming in, some slumbering support for the DXY could linger on and limit any substantial downturns. 

On the upside, there are no big changes to the levels traders need to watch out for. The first is 105.52, a barrier that held during most of April. The next level to watch is 105.88, which triggered a rejection at the start of May and will likely play its role as resistance again. Further up, the biggest challenge remains at 106.51, the year-to-date high from April 16. 

On the downside, the trifecta of Simple Moving Averages (SMA) is still playing as support. First is the 55-day SMA at 105.14, safeguarding the 105.00 figure. A touch lower, near 104.61 and 104.48, both the 100-day and the 200-day SMA are forming a double layer of protection to support any declines. Should this area be broken, look for 104.00 to salvage the situation.