US DOLLAR: AT CROSSROADS

US Dollar not losing momentum

The US dollar’s robust climb persists, driven by surging yields, solid economic fundamentals and its status as a safe haven. Notably, it has achieved 11 consecutive weeks of gains against the euro. In stark contrast to other regions facing economic challenges, the US stands out, attracting investors with its resilient economic indicators. While Europe copes with an economic slowdown and China grapples with property sector issues, the US is positioned as a beacon of stability.



The upcoming pivotal US employment report, forecasting a 150k rise in nonfarm payrolls for September, reinforces the Federal Reserve’s commitment to sustained higher interest rates. Early indicators signal another robust month for the US labor market, supported by a decrease in unemployment benefit applications and positive business surveys. The Federal Reserve’s dedication to maintaining high interest rates until 2024 has propelled the dollar to its lengthiest surge in the past nine years.



The US economy’s resilience, reflected in positive trends in employment, inflation, and energy prices, has further solidified the dollar’s global dominance. A renewed demand for the dollar may drive the Dollar Index towards a critical resistance level at 108.



U.S. government shutdown averted

Despite uncertainties, a last-minute agreement by the US Congress has averted a costly government shutdown. Whether this could lead to a rebound in stocks and a further drop in the dollar remains to be seen.



In the US, the Core Personal Consumption Expenditures (PCE) Price Index, the Fed’s favored inflation gauge, dropped. This supports expectations for the Fed to pause at the November 1st meeting.



EUR/USD is wobbly

EUR/USD has corrected to 1.0597, marking a 0.10% fall in the Asian session. Eurozone’s inflation dipped in September, a significant drop from August. Decreased energy costs contributed to this decline. Core inflation, excluding food and energy, also fell to the lowest in 11 months.

The sharp decline in inflation supports the view that the European Central Bank (ECB) may not need to persist with rate hikes. While inflation remains above the ECB’s 2% target, the downward trajectory aligns with the ECB’s cautious approach, aiming to avoid actions that could push the fragile eurozone into a recession. Fundamental outlook for EUR/USD is bearish. The technical outlook hinges on the pair’s ability to surpass key levels of 1.055 in the coming sessions.



Uncertainty persists for the Yen

Japanese officials attempt to curb USD strength through statements and measures. Despite intervention threats, the USD remains robust. Potential scenarios, like a US government shutdown, could offer opportunities for intervention, but significant action from the BOJ is crucial for lasting impact. The USD/JPY pair at 150 looks uncertain of itself means USD should be strengthening to 155.



For more insights and analysis, visit Uptrendpicks.com


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