US Dollar Strengthens on Upbeat Services PMI

The US Dollar (USD) gained strength on Monday, as positive economic data bolstered investor sentiment. The preliminary S&P Global Services Purchasing Managers’ Index (PMI) for December came in at 58.5, significantly surpassing expectations of 55.7 and the previous reading of 56.1. This robust figure indicates a strong expansion in the US services sector and provided a significant tailwind for the Greenback.

In contrast, the Eurozone and key European economies experienced mixed economic signals. While Germany’s services sector showed signs of recovery, the manufacturing sector continued to contract. Additionally, China’s retail sales for November fell short of expectations, further dampening global growth prospects.

The potential political instability in Germany, with Chancellor Olaf Scholz facing a vote of no confidence, added to the uncertainty in the Eurozone. A potential change in government could lead to policy shifts and market volatility.

Technical Factors

The US Dollar Index (DXY) has recently shown signs of consolidation after a strong rally. Key resistance levels to watch include 107.00 and 108.00, while 106.52 and 105.53 are potential support levels. The 200-day Simple Moving Average at 104.19 could provide further support if the DXY were to decline significantly.

Overall, the US Dollar’s strength is primarily driven by the robust US economy and the relative weakness of the Eurozone. However, geopolitical risks and potential policy shifts could impact market sentiment and currency valuations.