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USD Index Set To End Winning Streak Following Softer US Data

FOREX
  • A trifecta of weaker-than-expected data from the US weighed on the greenback during the US session prompting the dollar index to post 0.45% declines on Tuesday. This looks set to end a significant winning streak that has seen the index rise close to 4.5% in less than two weeks, with today’s pre-data high just two pips shy of the July/cycle highs at 109.29.
  • US Manufacturing and Services PMI, Richmond Fed Manufacturing and New Home Sales data all fell below median surveyed estimates, sparking a strong kneejerk reaction lower for the USD. As has been the case over most recent US data releases, USDJPY was extremely volatile and had a steep selloff, falling roughly 150 pips to intra-day lows of 135.81. The pair has since bounced back to around 136.70 but remains down 0.57% on Tuesday.
  • With major equity indices in more of a consolidation mode on Tuesday, the likes of AUD, NZD and CAD were able to capture near 0.75% gains. SEK and NOK are the strongest G10 performers as ~4% gains for crude futures have underpinned the 1.3% advance for the Norwegian Krone.
  • EURUSD weakness did extend heading into the start of European trading, however, 0.9900 proved firm support following slightly better than expected European Flash PMI’s. Potential short covering took EURUSD back above yesterday’s breakdown point of 0.9952 shortly before the US data, however, the poor US prints fuelled a quick spike back above parity to 1.0018 highs. Given the short-term bearish technical developments and the ongoing concerns regarding the European energy crisis, the pair fell quickly back below 1.0000 and remains just 0.25% higher on the day, relatively underperforming it’s G10 peers and the magnitude of the DXY adjustment.
  • US Durable Goods and Pending Home Sales are the only data points on Wednesday. Thursday will bring the minutes of the ECB's July policy meeting and the German IFO business survey. Focus remains on Fed Chair Powell’s remarks from Jackson Hole, scheduled for Friday.
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