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Talking Points:

- The US Dollar rally continues unabated, now up for the ninth time in 11 sessions, as the DXY Index moves up to three-month highs.

- A quieter news flow overnight marked by the May Labor Day holiday keeping most markets around the world closed; US ISM Manufacturing due later today to shape expectations for Friday's Nonfarm Payroll report.

- Sentiment for the US Dollar is starting to turn more bearish as retail traders sell.

For longer-term technical and fundamental analysis, and to view DailyFX analysts’ top trading ideas for 2018, check out the DailyFX Trading Guides page.

The US Dollar (via the DXY Index) is trading at anear four-month high as its month-end rally has continued into May. Many major financial markets were closed today due to the May Labor Day, including Germany, France, Spain, China, and Hong Kong, keeping a lid on the newswire, letting greenback run continue unabated. Gains have now accumulated in nine of the past 11 trading sessions.

The big news piece of the past 24-hours, given the void created by the holiday, has been the development that the Trump administration is delaying implementation of the proposed aluminum and steel tariffs on Canada, the EU, and Mexico until June 1. As previously discussed, the imposition of tariffs would negatively impact the US economy and the US Dollar, thus news of their delay (perhaps permanently) is seen as a positive for the greenback.

Notably, EUR/USD's losses have seen it drop through the 1.2070/90 zone (resistance in August and September 2017 and January 2018), leaving it exposed to more downside as bearish momentum accelerates. Similarly, GBP/USD has dropped back to the trendline originating in January 2017 as BOE May rate hike odds have absolutely disintegrated over the past two weeks, down to 17% after peaking at 85% in mid-April.

Looking ahead to the calendar, the April US ISM Manufacturing survey kicks off a trio of releases this week that will shape expectations ahead of the April US Nonfarm Payrolls report on Friday (ADP Employment on Wednesday and ISM Services on Thursday round out the trio).

But before speculation around the US jobs report can begin in earnest, traders will have to contend with the May FOMC meeting tomorrow. While no change in rates is expected, given recent gains in inflation and the prospect for strong economic growth through mid-2018, it is widely expected that the FOMC's policy statement will have a hawkish hue that keeps June in line for a 25-bps rate hike (when a new Summary of Economic Projections is released).

See the above video for technical considerations in the DXY Index, EUR/USD, USD/JPY, GBP/USD, AUD/USD, NZD/USD, Gold, and the S&P 500.

Read more: FX Markets to Focus on RBA & FOMC, Eurozone GDP & CPI, US NFPs

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--- Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

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