The dollar is starting the week higher vs. its G10 counterparts. The dollar index is +0.32% at 104.651 (its highest level since July 11th) and approaching short-term resistance at 104.85. Primary gains for the greenback are +0.39% vs. EUR, +0.34% vs. NZD, +0.30% vs. CHF and +0.25% vs. JPY.
The dollar had been in a loss position vs. JPY earlier in today’s session but support at 153.00 prevented further decline and the USDJPY 200-day moving average support at 152.28 is helping to keep yen gains in check. Resistance for the pair is at 155.50, an example of support turned resistance after breaking below that level on July 24th. Traders are focused on Japan’s central bank meetings this week with the possibility of the Bank of Japan outlining a plan to reverse years of stimulus.
This week’s U.S. economic calendar is full, but the key focus is on the FOMC’s rate decision announcement on Wednesday at 2pm ET. No change is expected (4% probability) to the current 5.25%-5.50% target range but there is anticipation for a dovish shift in the policy statement. Reflecting the potential policy shift, Fed Funds Futures are now pricing in a full 0.25% cut at the FOMC’s September 18th policy meeting and a high likelihood (92.9% probability) of another 0.25% cut at the December meeting.
U.S. Nonfarm payrolls for July will be released on Friday. Expectation is for a 175k gain, a drop from June’s 206k gain.
Equity volatility remains elevated following the CrowdStrike outage from ten days ago. The VIX Index (measure of equity volatility, commonly referred to as the ‘fear index’) peaked at 19.36 last Thursday, its highest since April 19th. Prior to the outage the VIX had ranged between 12.00 and 14.00.
Gold has retreated from its $2,483.60/oz record high on July 17th, now trading at $2,381.69. Oil is -0.79% today at $76.58/barrel. The $79.78 to $78.27 gap between the 22nd and 23rd should limit oil gains should prices reverse.
