Chapter 7  USDX: Important Data Coming, Disturbances May Still Exist(7.5)


During the Asian session on Wednesday (July 5th), the US dollar index is trading in a narrow range, currently trading around 103.1. Yesterday, the US financial market was closed for the Independence Day holiday. Therefore, the market trading was relatively flat, while traders are quietly waiting for jobs data later this week, which may affect the Fed's next move. However, a disappointing manufacturing PMI in the US was released on Monday, which has dragged the dollar down. The ISM manufacturing PMI fell to 46.0 from 46.9 in May, the lowest since May 2020, exacerbating traders’ concerns of a recession. However, if Friday's strong employment data is combined with previously reported inflation that exceeds the target, a weak manufacturing PMI will be unable to curb the Fed from resuming tightening later this month, and the dollar will strengthen again.

Data: The US ISM manufacturing PMI recorded 46 in June, which is fail to meet market expectations and the previous value. The data sits below the boom-or-bust line for the eighth consecutive month, indicating a sustained contraction in US manufacturing that has lasted longer. The final Markit manufacturing PMI in the US recorded 46.3 in June, unchanged from expectations. US construction spending recorded 0.9% MoM in May, higher than market expectations of 0.5%.

Important data for traders: Eurozone PPI (May), Germany/France/

Eurozone Services/Composite Final PMI (June), US Factory Orders MoM (May).

Technical Analysis

Trading at the daily timeframe, the MACD has formed a golden cross near the axis, with the MA5 crossing the MA10 and MA20. The price has also rebounded 3 consecutive times, which initially prevented the fall and formed a rebound trend. Currently, the bulls slightly prevailed, but it is not yet possible to judge whether it is a rebound or a reversal. However, as the price is on the lower edge of the upward box and starts the rebound, it will fluctuate to the upside in the short term.

Traders can take long positions around 103.15 on MA5, with the stop loss set at 102.9 at MA10 and the first target of take profit is 103.7. After setting positions to break even, the second target looks at 104.2.

USDX: Important Data Coming, Disturbances May Still Exist(7.5)-Pic no.1

Trading Recommendations

Trading Direction: Long

Entry Price: 103.100

Target Price: 104.100

Stop Loss: 102.900

Support: 102.900/102.500

Resistance: 103.700/104.100

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