US Dollar May Retreat as Rally Struggles to Find Fresh Fodder

DXY

FUNDAMENTAL FORECAST FOR THE US DOLLAR: NEUTRAL

Dollar Talking Points:

  • US Dollar accelerated ceiling after hawkish FOMC process decision
  • July’s CPI information approaching to strengthen status-quo Fed rate travel view
  • Absence of new near-term catalysts competence open a doorway for a pullback

See a latest US Dollar forecast learn what will expostulate prices in a third quarter!

The US Dollar accelerated ceiling final week, powered by a hawkish Fed financial process proclamation (as expected). Central bank officials upgraded their comment of altogether growth, practice and acceleration to vigilance that dual some-more rate hikes are substantially on a calendar before year-end.

On a information front, a spotlight now turns to July’s CPI report. The title and core acceleration measures are approaching to register unvaried from a before month during 2.9 and 2.3 percent on-year respectively. Such formula would be broadly unchanging with a Fed’s assured posture.

While this is understanding of a greenback’s altogether uptrend, it competence tumble brief of charity sufficient procedure to expostulate near-term gains. Indeed, even after final week’s hawkish FOMC statement, a priced-in luck of a Dec travel hardly budged from 60 percent.

This hints a US territory competence need some-more than only bolster of a standing quo to means ceiling momentum. On-going trade fight tensions between Washington and Beijing competence offer a catalyst. If escalation triggers risk aversion, a currency’s unequaled liquidity competence reinstate support from haven-seeking collateral flows.

External developments ought to be kept in mind as well. Crosscurrents following a RBA and RBNZ rate decisions around AUD/USD and NZD/USD competence relate as drivers of USD some-more broadly in a deficiency of other influences. Dovish outcomes on both fronts competence meant such army are nominally helpful.

These considerations aside, a deficiency of uninformed provender locally competence interpret into a consolidative tone. CFTC positioning information reveals a high build in suppositional net-long US Dollar bearing recently, opening a doorway for profit-taking that breaks a currency’s four-week winning streak.

FX TRADING RESOURCES

— Written by Ilya Spivak, Sr. Currency Strategist for DailyFX.com

To contact Ilya, use a comments territory below or @IlyaSpivakon Twitter

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