Dollar at key technical levels
Additionally, in the case of USDJPY, rumors of possible intervention are increasingly circulating, although the market generally seems to be "testing" higher levels – this morning we brushed against the 2024 peak at 161.94 (where authorities had then taken action).
The view that a strong dollar is the market’s response to a fairly likely tightening of policy by the Fed in the fall has a solid foundation, but… U.S. Treasury yields did not rise excessively yesterday, and many things could still happen before September (when Warsh would raise rates). In other words, the dollar would need a strong argument to jump over the mentioned important technical resistances on many charts and find fuel for further weeks of growth. But where? The inflation thread seems to be quieting through oil and it appears that Trump will do a lot to make part of the public forget where “that Iran” is on the map by November.
Monday saw a pullback in U.S. big techs, which automatically spoiled the mood in Asia and also set Europe on a downward trend. But does Wall Street now have arguments for a stronger correction? Theoretically the market could cool slightly, but remember that in three weeks (mid‑July) the earnings season for Q2 will begin, and appetites could be high.
A stronger dollar hit metals on Tuesday, but both gold and silver and copper were at important technical levels. The so‑called soft commodities fared better, influenced by "favorable for speculators" weather conditions (increasing concerns about El Niño).
The macro calendar on Tuesday will be sparse. In the afternoon (15:45) attention will be drawn to U.S. PMI estimates for June. Those we already know for the euro zone (industry 51.3, services 48.9) and the United Kingdom (industry 53.1, services 48.7) were mixed.
EURUSD hovers around key 1.14
European Central Bank President Christine Lagarde did not help the euro yesterday, stating that risks for a second round of inflation have fallen – as a result, the expectation of a second rate hike by the ECB this year is fading.
However, this should not be an excessive surprise given the recent pullback in oil prices, or the mixed state of the European economy (as shown by today’s June PMI estimates).
Daily EURUSD chart
The EURUSD pair slightly breached the March low area at 1.1411 this morning, but the 1.14 area still holds. Key technical levels also exist on other USD pairs, reinforcing the thesis that markets are in a critical spot.
Tension on Wall Street, as illustrated by falling futures contracts, theoretically could support a dollar risk‑off, but in reality not necessarily. If we stay above 1.14 until the evening, a bullish correction may appear tomorrow.
The pretext might be today’s PMI estimates for the U.S. (15:45) – if they were weaker, it would signal that the Fed would not hike rates, and it might end with just one "adjustment"? In any case, the inflationary PCE Core is only on Thursday, but the market already talks too much about it to be discounted earlier.
