DXY Declines On US Holiday

The US dollar is facing further scrutiny in the wake of the depressing ADP and ISM Services PMI readings. Markets become more certain that the Fed will lower rates in September. Investor focus is now shifting to the June Nonfarm Payrolls data, which is due on Friday.

The DXY Index, which measures the strength of the US dollar, has been declining as traders evaluate a number of data releases on Wednesday. US traders will observe Independence Day by staying out of the market.

Market players are considering concerns raised by disinflationary signals and a weakening labour market in the US, making a September rate decrease seem more plausible. Federal Reserve (Fed) officials continue to take a cautious stand, but they are beginning to express concern about the challenges facing the labour market.

The market has to sift through Wednesday’s data releases while US traders are off for Independence Day. Automatic Data Processing (ADP) revealed private sector employment in June, although it was less than anticipated, with 150K new positions added compared to a prediction of 160K.

Furthermore, the weekly Jobless Claims total of 238K exceeded the projected amount of 235 K. The ISM Services PMI, which fell to a record low of 48.8 from 53.8 in May, dramatically underperformed market forecasts of 52.5 in June, indicating contraction in the US service sector.

The Federal Reserve’s June 11–12 meeting minutes showed that while members acknowledged the US economy was slowing and that price pressures were lessening, they avoided committing to rate decreases in favour of a cautious, data-dependent approach.

Investor focus is now turning to the highly anticipated June Nonfarm Payrolls report on Friday. ‘Whisper figures’ estimate 198K jobs, compared with the Bloomberg consensus of 190K, down from 272K in May.

Technical Outlook:

The DXY technical outlook turned negative after the index fell below the 20-day Simple Moving Average (SMA). With both the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) now in negative territory, the market is looking at the potential for further decline towards the 105.00 and 104.50 supports if data continues to disappoint.