More profound digits or time to return?
While ISM Manufacturing PMI (May) at 61.02 beat the expectations, the dollar is trading under pressure, losing 0.32% at 89.70 so far on Tuesday.
On Friday, with raising personal consumption expenditures price index (PCE), a measure that closely following by the Federal Reserve, to 3.1% yearly base, much more than market expectations as well as FED 2% target, USD got some supports; however, today was not USD day, and now it is almost 0.45% lower than Friday high.
On the other hand, US ten-year bond yields rose over 1.64%, and it is not the same signal for more fall in the USD index, especially with this data.
While better than expected data lowers the USD safe-haven demand and causes USD Index to fall, a more substantial recovery supports the greenback against other competitors.
Putting these data and news together with the current market sentiment, putting more pressure on FED members to reduce the stimulus and start raising the rates; however, Friday NFP numbers will play a crucial role in the FOMC members' decision.
However, FED speakers during last week, repeatedly emphasizing that they expect price pressures to be transitory and the market still need to have the monetary stimulus for full recovery, while the labor market is still under pressure with more than 8 million unemployed American from the level seen before the start of the pandemic.
Today Vice Chair Randal Quarles and Governor Lael Brainard will have a speech as well; still, the market likely will be waiting for Friday labor data, especially after much weaker April numbers.
Analysts at ING said that "Our team expects a slightly lower than consensus increase at +500k (consensus around 650k) as labor supply fails to keep pace with increasing demand. These kinds of lower-than-consensus numbers could be the story for the next two to four months and could continue to take the sting out of the Fed tapering debate."
And about the dollar, analysts at Singapore's OCBC Bank earlier today said that: "The dollar bias remains negative on the immediate horizon. The inability to impute Fed tapering or rate hike expectations continue to weigh."
USD Index technical review
Earlier today, once again, DXY fall under 90.00 level to new multi-day lows. This index also could breach under the created range since the middle of May between 89.75 and 90.15. Technical RSI at 38 with moving under OBV trend line, supports the more down move; however, breaching under YTD low at 89.20 (January 6) will confirm the downtrend, and an uptrend needs a daily close above 90.15.
