European Open: The dollar rally loses steam, US economic data picks up pace

Asian Indices:

Australia's ASX 200 index rose by 24.8 points (0.33%) and currently trades at 7,528.90
Japan's Nikkei 225 index has fallen by -118.12 points (-0.43%) and currently trades at 27,567.67
Hong Kong's Hang Seng index has risen by 57.94 points (0.27%) and currently trades at 21,356.64
China's A50 Index has fallen by -8.66 points (-0.06%) and currently trades at 13,552.74

UK and Europe:

UK's FTSE 100 futures are currently up 47.5 points (0.61%), the cash market is currently estimated to open at 7,912.21
Euro STOXX 50 futures are currently up 46 points (1.09%), the cash market is currently estimated to open at 4,255.31
Germany's DAX futures are currently up 156 points (1.02%), the cash market is currently estimated to open at 15,476.88

US Futures:

DJI futures are currently down -12 points (-0.04%)
S&P 500 futures are currently up 11.75 points (0.09%)
Nasdaq 100 futures are currently down 0 points (0%)

Earnings of interest:

US earnings: AMC – Disney (DIS)

* BMO = Before market open, DMH = During market hours, AMC = After market close, TNS = Time not specified

US-Sino tensions remain strained, with the Pentagon claiming China refused to receive a phone call regarding the alleged spy balloon (after the US shot it down…)
Without a fresh catalyst to drive risk-appetite, I suspect we’re now in a phase of consolidations and retracements as we head towards US inflation data next week
This could help the US dollar continue to pullback against its recent rally, but we’re not looking for oversized moves
It’s not a huge data day either, so traders may want to refer to lower timeframes to seek opportunities and not expect any home runs
Currency ranges were razor thin overnight, let’s hope that is not the case today in the European or US sessions

US Economic Surprise Index (CESI) hits a 5-month high

The US CESI has risen notably higher in recent days as economic data outperforms the (relatively grim) consensus. This points towards a soft landing, and likely something equity traders continue to hold onto. But stronger economic data also points towards a more-hawkish Fed as long as employment data continues to outperform. This is not a tradable indicator as such, but something to keep at the back of our minds whilst we get ‘fed’ lots of Fed noise on a daily basis.

US dollar index daily chart (DXY)

The US dollar index (DXY) posted three solid days of gains between Thursday and Monday. I cannot say I am overly surprised to see A Doji formed yesterday given the resistance cluster around 103.50 which includes a previous support zone, trend resistance and the 50-day EMA. But we also had a change in sentiment for markets yesterday that were eager for a decisively hawkish message from Jerome Powell, which was not delivered. Therefore I suspect the US dollar needs a pullback or period of consolidation before its next leg higher. And I maintain my view that the US dollar remains oversold, and there is more upside on the horizon after its initial pullback is complete.

Economic events up next (Times in GMT)

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