US Dollar Provides Safe Harbour From Swelling Recession Fears. Will USD (DXY) Break Higher?

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US Dollar, USD, Crude Oil, US Dollar, Gold, AUD, RBA – Talks

  • The U.S. dollar strengthened through the Asian session as a recession threatens
  • APAC shares are movingdlower, united by sorts and associated currencies
  • A lower oil price could help performance.Wwill a sick USD resume its upward trend?

The U.S. dollar retains favor as the growing likelihood of a global recession appears to be increasingly realized by investors. With risk aversion accelerating through markets, the Australian and Kiwi dollars were hit as the yen, Swiss and euro rose along with the “big dollar”.

The Wall Street cash session saw all major indices end in red and futures accelerated lower after the close. Soft personal spending data in the United States seemed to trigger the negativity.

The S&P 500 closed yesterday to mark its worst first six months of a calendar year since 1970.

APAC shares joined them lower on the third straight day, with the curious exception of Australia’s ASX 200.

Hong Kong was closed today as they celebrate 25 years since the transfer of control of Britain’s territory to China. President Xi Jinping visited the city and hammered home the message “one country, two systems”. This is in line with Beijing’s promise to respect Hong Kong’s greater political and economic openness compared to the mainland.

China’s Caixin PMI was better than expected at 51.7 against the 50.2 forecast, but that wasn’t enough to stem the tide of risk aversion.

Crude oil is down again after OPEC + said they would add all barrels offline during the pandemic. The thought of an impending recession also undermined the price there.

Gold continued to slide lower despite lower Treasury yields. The benchmark 10-year note returned below 3% after eclipsing 3.5% just a few weeks ago. A stronger U.S. dollar may be the culprit here, undermining the allure of the all-time anti-fiat yellow metal.

While AUD is on its knees today, the RBA will come next Tuesday and the market is forecasting a 50 basis point index.

Looking ahead, there are PMI numbers across Europe and the US as well as a series of European CPI figures. Then the focus will shift to data on ISM and construction spending.

The full economic calendar is visible here.

US Dollar (DXY) Technical Analysis

The US dollar index (DXY) is holding a 103.42 – 105.79 range currently. These levels can provide support and resistance respectively.

All of the short, medium and long term simple moving averages (SMA) is below the price and exhibits positive gradients. Recently crossed over the 10-day SMA, this could indicate that bullish is evolving.

USD DXY RAPERO

Chart creacted in TradingView

— Written by Daniel McCarthy, Strategist for DailyFX.com

To contact Daniel, use the comments section below or @DanMcCathyFX on Twitter



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