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U.S. Dollar Fades on ISM Manufacturing PMI Miss


U.S. DOLLAR ANALYSIS

  • ISM (DEC) – ACT:58.7;EST:60.1.
  • Market unphased by Omicron.
  • Bull flag sample stays.

ISM PMI FALLS BUT POSITIVES SEEN IN OTHER METRICS

The ISM manufacturing PMI information launch for December got here in under expectations (58.7) leading to preliminary greenback weak point nonetheless, higher than anticipated employment figures and decrease costs paid (decrease inflation) could favor the hawkish rhetoric presently flooding the market. As a rule of thumb, a print above 50 displays and increasing manufacturing sector and vice versa which leaves the U.S. manufacturing sector in stable footing. All eyes flip to Non-farm payrolls (NFP) later this week for additional steerage.

ISM MANUFACTURING PMI (DEC):

ISM Manufacturing PMI (DEC)

Supply: DailyFX financial calendar

DOLLAR FUNDAMENTAL BACKDROP

POSITIVE START TO 2022 FOR THE U.S. DOLLAR

Yesterday, the IHS Markit PMI information was launched for the U.S. and got here in roughly in step with expectations (see calendar under).

MARKIT MANUFACTURING PMI (DEC):

Markit manufacturing PMI (DEC)

Supply: DailyFX financial calendar

Regardless of the slight undershoot, the greenback rallied on the again of upper U.S. Treasury yields as a consequence of elevated Fed price hike expectations. The primary price hike since 2018 is presently projected in March of this yr in keeping with the Fed’s implied charges under. U.S. 10-year Treasury yields have prolonged their upside surge immediately giving additional impetus to the dollar. Outlook for 2022 is prone to see yields push in the direction of the 2% mark which might see a powerful right here for the DXY. Price hike timing and communication can even be key to keep away from market shocks due to the frequency anticipated as a consequence of rising inflationary pressures.

FED INTEREST RATE PROBABILITIES:

Fed interest rate probabilities

Supply: Refinitiv

Issues across the Omicron variant are being shelved by monetary markets in expectation that there can be minimal financial influence from this pressure of COVID-19.

TECHNICAL ANALYSIS

U.S. DOLLAR INDEX DAILY CHART

DXY daily chart

Chart ready by Warren Venketas, IG

Because the bullish breakout from the medium-term channel (black), the DXY has consolidated within the type of a bull flag sample (blue). Worth motion has held inside this band since late November however could push increased ought to we see a each day candle shut above flag resistance. This could then carry into focus the 97.00 psychological deal with as soon as extra. Lengthy-term, the U.S. greenback outlook stays firmly bullish within the present basic backdrop.

Resistance ranges:

Assist ranges:

Contact and observe Warren on Twitter: @WVenketas



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