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US Dollar Rise Maintained, Eyes on Month End Rebalancing

US Dollar Rise Maintained, Eyes on Month End Rebalancing

Justin McQueen, Analyst

USD Price Analysis & News

  • US Dollar Maintains Gains
  • US Data to Boost Volatility

USD Holding Onto Gains

The USD remains on the front foot after yesterday’s corporate USD demand (typically on end of month spot date), however, with little in the way of notable events on today’s calendar, besides the England vs Germany match of course, I suspect conviction will be somewhat low ahead of ISM and NFP data. That being said, month end rebalancing will no doubt garner market interest, which as it stands, investment bank models have pointed to mild USD selling. Should this be the case, my bias is to fade dips in the USD against low yielders such as the CHF, which is also vulnerable from a positioning standpoint within the leveraged community. As a reminder, the month-end flows tend to be observed around the London 4pm fix.

US Data Importance Rises After Fed Reaction Function Changes

That said, while volatility has been subdued as we close out the quarter, this may not last for long with tier 1 data just around the corner. A reminder that in light of the FOMC’s recent hawkish pivot, the central bank’s reaction function has altered slightly, having signalled that they are less willing to allow the economy to run hot. Therefore, this has increased the importance of economic data since the June FOMC and thus raises the potential for greater market volatility. Between now until then, market conditions are likely to be choppy. The USD continues to oscillate around the 92.00 handle with pullbacks to 91.50 expected to find support, on the topside resistance resides at 92.40-50.

USD Chart: Daily Time Frame

US Dollar Rise Maintained, Eyes on Month End Rebalancing

Source: Refinitiv

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