The US dollar dominance in the market seems to have attained its climax after hitting its all-time high at 105 last month. This was caused by the interest rate hike in April by 50 basis points, giving the US dollar an edge over every other currency in the market. From April till May, this dominance seems to be creating a new low this week, with the dollar index crossing 102.1 today during the Asian session – the first time in four weeks.
Many pairs crossed with the US dollar are currently retaking a fresh breath and printing new long green candles after a long bearish trend. EURUSD, for instance, has broken its 2 months resistance at 1.0600 and is trading today at a new all-time high at 1.06900. Also, NZDUSD had broken its resistance this week at 0.64040 to create a new ATH at 0.64897.
Commodities such as gold & silver, and crude oil have been favoured by this weakness. Investors are gradually returning to the risk-on mode to diversify their portfolios into risky assets.
Essential Factors to affect the US dollar today
Some events from the economic calendar today will further determine the next direction for the US dollar. We have discussed them below:
Flash Manufacturing PMI and Flash Services PMI
The Flash Manufacturing PMI gives an estimated value of the manufacturing strength of a country using 80% – 90% value of the total Purchasing Managers’ Index (PMI) survey responses from each month. Higher readings from this data will mean a bullish trend for the dollar. A lower reading below the forecast which is 55.1, would indicate an unfavourable direction for the US dollar.
Also, the Flash services PMI on its part, gives an estimate of the Services Purchasing Managers’ Index (PMI) in the US. An increase in purchasing power will also mean a positive for the dollar and vice-versa.
New Home Sales
The forecast for this is 751k, while the previous is 763k. An increase in the new home sales is a good sign of economic growth.
Richmond Manufacturing Index
This is an index of the manufacturing activity carried out so far in the Fifth Federal Reserve District, which includes: West Virginia, Carolina, the District of Columbia, Virginia, and Maryland. The forecast for this is 9 while the previous figure is 14. Higher readings will be bullish for the US dollar.
Powell’s Speech
The Fed Chairman, Jerome Powell, will deliver an important speech today during the New York session. This will largely determine the destiny of the US dollar. Any dovish stance from him will take the dollar index below 100. Will another hawkish stance revise the dollar dominance again?
