The US Dollar (DXY) experienced initial selling pressure on Monday but recovered later in the session after positive ISM Services figures for July were released. Despite this rebound, concerns persist about the US economic outlook and the possibility of a recession.
Market Developments:
- ISM Services PMI: The index rebounded from contraction to growth, rising from 48.8 to 51.4 in July, driven by improvements in the Services Employment Index and the New Orders Index.
- Market Sentiment: Soft US jobs data last Friday has sparked fears of a potential recession and led to a global bond rally and equity sell-off. Market participants are now anticipating significant easing by the Fed, with expectations of a 125 bps cut by year-end and a 50 bps cut in September.
- Fed Speakers: There is a possibility that upcoming Fed speakers might attempt to temper the dovish bets, as markets have repeatedly misjudged the Fed’s policy path in this cycle.
Technical Outlook:
The DXY outlook remains bearish, with the index trading below both the 20-day and 200-day SMAs. The RSI and MACD indicators suggest increasing selling pressure, although the RSI is now in the oversold region, hinting at a possible correction.
Key Levels:
- Supports: 102.50, 102.20, 102.00
- Resistances: 103.00, 103.50, 104.00
Overall:
The US Dollar’s recovery following the positive ISM Services data indicates that the market remains cautious despite recession fears and dovish bets on the Fed. The upcoming Fed speakers and economic data releases will be crucial in determining the currency’s future trajectory.
