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US Dollar Dithers After Debt Deal Passes House of Reps. Will the Fed Now Drive USD?

US Dollar Dithers After Debt Deal Passes House of Reps. Will the Fed Now Drive USD?


The US Dollar struggled for direction on Thursday after the US debt deal passed through the House of Representatives ahead of the next hurdle. The market is now eyeing the Fed for clues.

US Dollar, DXY Index, USD, Treasury Yields, Debt Ceiling, Crude Oil - Talking Points

  • The US Dollar appears to be recalibrating as debt ceiling woes subside
  • Treasury yields rolled over in the last few days but seem to be holding ground now
  • If the Fed is getting ready to be less hawkish in June, will the USD bull run continue?

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The US Dollar appeared somewhat discombobulated in the aftermath of the debt deal sailing through the House of Representatives late Wednesday Washington time. The deal now faces a vote in the Senate that is anticipated to be made on Friday.

Treasury yields languished into the North American close but have since added a few basis points going into Thursday. The 1-year note continues to oscillate around 5.20% after nudging a 23-year high near 5.33% last Friday.

Overnight, Philadelphia Federal Reserve Bank President Patrick Harker and Fed Governor Philip Jefferson both intimated that the Fed should ‘skip’ a hike at the next gathering.

They were also in unison as they laid out the message that a non-hike at the June 14th Federal Open Market Committee (FOMC) meeting does not mean that further lifts in the target rate cannot be ruled out.

Both gentlemen expressed their dislike for the word ‘pause’.

Elsewhere today, the Caixin PMI number improved to 50.9 for May from the 49.5 anticipated and prior. This PMI number is a survey of smaller Chinese companies with a narrower sample than the official PMI that missed estimates yesterday. All the latest economic data can be seen on the economic calendar here.

Equity market sentiment appeared buoyed after the PMI reading and the US debt passing through the House. All the major APAC indices are in the green with the exception of South Korea.

Wall Street futures are pointing to a fairly muted start to the cash session.

Currencies have had a quiet day so far while crude oil and gold have seen lacklustre trade so far.

Looking ahead, it is PMI data dump day with Eurozone CPI and jobs figures also being seen. Check the calendar for more events.

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The DXY index appears to be in a short-term sideways pattern for now.

Since breaking above a descending trend line, the price has been on a bullish run to mark an 11-week high. Resistance might be at the 76.4% Fibonacci Retracement at 104.79.

On the downside, support may lie at the breakpoints of 103.60 and 102.80.


Chart created in TradingView

--- Written by Daniel McCarthy, Strategist for

Please contact Daniel via @DanMcCarthyFX on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.