US/China Talks
The US Dollar is rallying firmly at the start of the week as traders wait with optimism for an update from US treasury secretary Bessent on the US/China trade talks over the weekend. Commenting over the weekend, Trump said the talks had been very positive with the two sides heading for a total reset. However, no further details were given and Trump’s penchant for exaggeration means the details revealed today might underwhelm traders unless any concrete progress was made. As such, the implications for USD today are very binary: if traders are satisfied with the update, USD should rally further and if traders are dissatisfied, we’ll likely see a USD reversal lower.
Fed Expectations
DXY is up around 1.2% currently, now more than 3.3% up off the YTD lows printed last month. The rally comes alongside a shift in sentiment from the Fed which noted this month further patience will be required on rates. Powell signalled that the bank would refrain from near-term rate cuts while it monitors ongoing risks around the US trade war. Traders scaled back their Fed rate cut projections on the back of the meeting, with July now pegged as the next cut, down from June previously.
US Inflation Due
Looking ahead this week, along with updates on the US/China trade talks, the market will also be monitoring the latest US inflation data due tomorrow. Annualised headline CPI is expected to hold unchanged at 2.4%. If seen, this should have little impact on USD. However, if we see any surprise upside tomorrow, this should further dampen near-term Fed easing expectations, pushing USD up higher.
Technical Views
DXY
The rally in DXY has seen the market trading up to test the bear channel highs and the 101.91 level resistance. With momentum studies bullish, the focus is on a break higher here with 103.40 the next target for bulls. Below, 100.38 remains the key support to watch.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.