US Dollar Remains Bid, However, Nears Overextended Territory

US Dollar Analysis and News

• USD Remains Bid, Markets Pricing in 4 Hikes By September
• Possible Overextension in the Dollar on Month End Flows, Eyes on London 4pm FIx

The US Dollar remains on the front foot following the fallout of Powell’s hawkish press conference (full commentary). At the same, I also get the sense that month-end flows could have exacerbated some of the upside in the greenback. As a I noted yesterday, it was spot month end (T-2) and in conditions where the S&P 500 falls 3% or more in a month, yesterday would have on average been the best performaning day for the USD.

Taking a look at the current USD momentum in the table below, the greenback looks somewhat overbought and while an asset being overbought or oversold is not a sole reason why you should trade the other way, if my suscpicions about month-end are correct, then keep an eye out on Monday 4pm London time for a possible mean-reversion. This could be particularly evident in the high-beta currencies, however, this would also be dependant on equities stabilising.

Source: Refinitiv

Aside from the repricing of Fed rate expections with 4 hikes now seen to take place by September, which has been the dominant driver of price action at present. Today will see the release of the PCE figures, however, from a trading point of view, I am not expecting much in the way of a move from the USD, given that the data is unlikely to really move the needle for the Fed, who have made their intentions clear.

DailyFX economic calendar