US Dollar extends consolidation as labor market data looms

• The US Dollar trades slightly in the green against almost every major currency. 
• US markets open up after the Labor Day holiday and gear up for ISM PMI data. 
• The US Dollar Index has an important resistance level within reach for a breakout. 

The US Dollar (USD) trades broadly stable on Tuesday as it officially starts its trading week after US markets were closed on Monday for Labor Day. The Greenback is slightly up against almost every major currency on the quote board, except for the Japanese Yen (JPY). Meanwhile, markets tremble a little bit on the back of news that German car maker Volkswagen is considering closing factories in its home country for the first time ever, which is a massive blow to the German government and the European economy. 

Tuesday’s economic calendar features the Institute for Supply Management (ISM) Manufacturing survey for August. Traders will get to see how the US manufacturing sector is holding up. Seeing the recent headlines out of Germany, a clear split between the two nations could drive the DXY higher. 

Daily digest market movers: Catching up after the holiday

• At 13:45 GMT, S&P Global will release its final Manufacturing number from the Purchasing Managers Index for August. The preliminary reading stood at 48 and it isn’t expected to be revised.  
• At 14:00 GMT, the Institute for Supply Management (ISM) will release its Manufacturing numbers for August:
• The headline PMI is expected to head to 47.5 from 46.8.
• The Prices Paid component should head to 52.5 from 52.9.
• The New Orders index stood at 47.4 in July, and the Employment Index was at 43.4. 
• Apart from the ISM, the TechnoMetrica Institute of Policy and Politics (TIPP) will release its economic Optimism survey for September. The previous reading was at 44.5 with 46.2 expected.
• Equities are struggling across the board, with minor losses for all European indices and US futures on the back foot as well. 
• The CME Fedwatch Tool shows a 69.0% chance of a 25 basis points (bps) interest rate cut by the Fed in September against a 31.0% chance for a 50 bps cut.  Another 25 bps cut (if September is a 25 bps cut) is expected in November by 49.9%, while there is a 41.5% chance that rates will be 75 bps (25 bps + 50 bps) below the current levels and an 8.6% probability of rates being 100 (25 bps + 75 bps) basis points lower. 
• The US 10-year benchmark rate trades at 3.90%, slightly down on the day after opening at 3.93%.

US Dollar Index Technical Analysis: Next step 

The US Dollar Index (DXY) is at a crossroads this Tuesday, when the ISM numbers might be moving the DXY either above a pivotal resistance or trigger a firm rejection and send it back down. Expect to see a very whipsaw DXY on the charts this week with nearly every trading day bearing substantial economic data points. 

Looking up, 101.90 is very close and could easily be broken should ISM come in stronger. A steep 2% uprising would be needed to get the index to 103.18.  A very heavy resistance level near 104.00 not only holds a pivotal technical value, but it also bears the 200-day Simple Moving Average (SMA) as the second heavyweight to cap price action.

On the downside, 100.62 (the low from December 28) holds as support, although it looks rather feeble. Should it break, the low from July 14, 2023, at 99.58 will be the ultimate level to look out for. Once that level gives way, early levels from 2023 are coming in near 97.73.

US Dollar Index: Daily Chart