US Market Commentary - Tuesday, March 5

US Data Due

The US Dollar continues to trade in a very tight range ahead of today’s US ISM services PMI. Price action in DXY has stagnated over the last week in response to a slew of weaker-than-forecast data which seems at odds with the Fed’s message over keeping rates in restrictive territory. A sharp drop in retail sales, the ISM manufacturing number and consumer sentiment alike has seen traders mulling the prospect of sooner-than-forecast Fed rate cuts. The Fed itself has reaffirmed its message that inflation back to target is not yet a done deal, highlighting its willingness to keep rates high for as long as necessary. However, with US economic data weakening sharply, traders wonder if the Fed might be forced to shift its view.

 

ISM Services Forecasts

Looking ahead today, expectations are for a move down to 53 from 53.4 prior. While still in positive territory, this shouldn’t cause any meaningful price movement. However, if we undershoot today’s forecasts, particularly if (at the margin) we fell into negative territory, this would be firmly bearish for USD.

 

Powell Comments & NFP due

Looking ahead this week, we have plenty of volatility risk in DXY with Fed’s Powell testifying in Congress tomorrow and Thursday. Following those comments, traders will turn their focus to the latest US jobs data due on Friday with any weakness in that data likely to drive DXY through current range lows.

 

Technical Views

 

DXY

Following the breakdown below the bull channel, price continues to hold support at the 103.48 level for now. With momentum studies bearish, risks of a downside break are growing with 101.22 the bear target on any downside shift. To the topside, 104.95 remains the key resistance for bulls.  

(Click on image to enlarge)

 


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