Dollar Kicks Off August 25 with Warsh Speech, PCE Inflation in Focus: DXY Still Bearish
By Aboki Forex —
The U.S. dollar starts trading on August 25 with markets fixed on Fed Chair Kevin Warsh's first Jackson Hole speech and the PCE inflation report due later this week. The Dollar Index sits at $99.02, up slightly from $98.55 on the 2-hour chart, but remains in a downtrend.
Stronger U.S. sanctions against Iran gave the dollar minor support, as foreign companies doing deals with Iran could lose access to the U.S. financial system. That raised demand for the greenback. But an aggressive Treasury plan to buy back long-maturity bonds to control long-term borrowing costs has raised fresh concerns about U.S. fiscal credibility.
Euro and Pound Hold Firm
The euro is supported by solid monetary policy. The Eurozone composite PMI rose to 52.1 in August, the highest since November. Manufacturing PMI hit a 54-month high, with new and incoming orders growing at the fastest pace in over three years. Unemployment also improved. Most investors still expect the ECB to raise the deposit rate from 2.25%, though slowing inflation may keep rate hikes less aggressive this cycle.
Sterling is expected to stay firm, with at least one more Bank of England hike expected this year. UK inflation reached 2.9% in July. Softer labour market data and weaker retail spending may limit more aggressive tightening, but the pound's recent strength mostly reflects dollar weakness.
Yields and Technical Levels
The 10-year Treasury yield is around 4.7%, and investors are struggling to reconcile bond market stress with the possibility of further Fed rate hikes. The dollar index rebound gives short-term momentum, but it still trades below both the 100-EMA at $99.22 and the 50-EMA at $99.02. The overall downtrend remains intact. RSI is at 55, recovering from oversold levels and back above the neutral 50.
Resistance stands at $99.13 and $99.27, with further levels at $99.38 and $99.71. A move above those opens the next targets at $100.03 and $100.42. If selling pressure holds, support is at $98.99, $98.82, and $98.55.
For August 25, the dominant theme is policy uncertainty in Washington versus clearer rate expectations in Europe and Britain. After Jackson Hole, the next major market mover will be the PCE inflation data.