You find out the true test of a trend during the counter-trend episodes. Do buyers show up to hold higher-lows? Or does fear and skepticism cause them to take a back seat as sellers continue to dominate. If that's the case, then supports are vulnerable and there could be motive for continued selling. But, if bulls do stand up and hold a higher-low, that can be a sign that the market is still harboring longer-term oversold dynamics after a heavy one-sided move drove for so long.
That's where we're at with the US Dollar.
The USD finished July as its strongest month in more than three years. And it followed that up with its largest sell-off in three months as multiple factors hit the greenback on Friday. There was the NFP report, with massive revision to the headline number for the prior two months. And then Trump fired the head of the BLS and then towards the end of the session, the resignation of a Fed governor which will allow Trump to appoint a more-dovish FOMC member about six months earlier than expected.
Collectively this served to push up rate cut expectations in September and that's what hit the USD so hard. And at this point markets are widely-expecting that next cut in September to a current 87.8% probability as of right now per CME Fedwatch.
But will these dynamics lead to a more dovish Fed? Powell didn't sound as though he was ready to cut rates on Wednesday and he said it was the unemployment rate that the Fed will be watching - and that came in right at the expected 4.2%, which is very close to the 'full employment' level. There's also the Core PCE report from Thursday, which showed inflation is still moving higher - even without a Fed rate cut, and that follows a similar reading of CPI from earlier in the month.
The big question here is whether that can all allow for the USD to sink down to fresh lows and from the daily chart, there's a big spot of support potential around the April and early-June swing lows, spanning from 97.60-97.92. - js
That's where we're at with the US Dollar.
The USD finished July as its strongest month in more than three years. And it followed that up with its largest sell-off in three months as multiple factors hit the greenback on Friday. There was the NFP report, with massive revision to the headline number for the prior two months. And then Trump fired the head of the BLS and then towards the end of the session, the resignation of a Fed governor which will allow Trump to appoint a more-dovish FOMC member about six months earlier than expected.
Collectively this served to push up rate cut expectations in September and that's what hit the USD so hard. And at this point markets are widely-expecting that next cut in September to a current 87.8% probability as of right now per CME Fedwatch.
But will these dynamics lead to a more dovish Fed? Powell didn't sound as though he was ready to cut rates on Wednesday and he said it was the unemployment rate that the Fed will be watching - and that came in right at the expected 4.2%, which is very close to the 'full employment' level. There's also the Core PCE report from Thursday, which showed inflation is still moving higher - even without a Fed rate cut, and that follows a similar reading of CPI from earlier in the month.
The big question here is whether that can all allow for the USD to sink down to fresh lows and from the daily chart, there's a big spot of support potential around the April and early-June swing lows, spanning from 97.60-97.92. - js
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Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.