US Dollar higher as debt ceiling concerns grow another day


  • US Dollar gains some ground further into the European session after its start in the Asian start on Tuesday.
  • US debt-ceiling talks and geopolitical tensions triggered by Chinese ban on Micron lead the market action.
  • US Dollar Index pairs back incurred losses from Monday. 

The US Dollar (USD) is on a tear on Tuesday after a dismal session at the start of the week. The US Dollar Index (DXY) is showing signs of consolidation and continuation higher as crucial support level held on Monday, while tail risk is being priced in after US chip-manufacturer Micron got barred from China, with Japan and South-Korea eager to take over the business. A mild positive tone was the summary at the end of the first day of negotiations about the US debt ceiling this week, with a deal still possible. 

On the macroeconomic data front, traders will be on edge for the services numbers coming from the Purchase Managers Index (PMI) in the United States at 13:45 GMT. Question will be here if it will hold in positive territory above 50 (below 50 points to a contraction in activity), while the Richmond Fed Manufacturing Index number for May follows briefly after that (14:00 GMT) providing traders a good metric point in order to assess where to take the US Dollar next. On the other hand, a much lighter Fed speaker agenda on Tuesday with only Fed’s Logan giving welcome remarks at a conference on technology-enabled disruption. 

Daily digest: US Dollar advancing toward the US session

  • Former Treasury Secretary Mnuchin said that the US is moving closed to a debt deal as talks drag on another day. 
  • US equity futures are mildly in the red with the VIX still unchanged at 17 as of Monday. European stocks took a leg lower after China’s Hang Seng closed -1.25%. 
  • US Dollar printed a new monthly high against Chinese Yuan at 7.0670.
  • US President Joe Biden confirmed after talks with US House Speaker Kevin McCarthy that a default is off the table. 
  • McCarthy came out and said talks were productive, but no deal yet. The tone of discussion was better than before. 
  • The United States is working with allies like South Korea and Japan to circumvent any chip supply disruptions after US chip-manufacturer Micron got barred in China. 
  • Next to Neal Kashkari, Fed’s Jim Bullard came out in support for at least one, preferably two rate hikes on Monday.
  • Markets were briefly rattled on Monday by comments from Kashkari that the Fed will not bail out the US economy if a debt default occurs. 
  • The CME Group FedWatch Tool shows that markets are flip-flopping again after comments from Fed Chair Jerome Powell on Friday, have priced out again a rate hike for June, while an initial rate cut has been delayed until September instead of July before. 
  • The benchmark 10-year US Treasury bond yield trades at 3.74% and prints a new high for the past month. This could allow to push the US Dollar higher and the DXY further in the green. 

US Dollar Index technical analysis: Support confirmed and uptrend on its way

The US Dollar Index (DXY) has taken out both the 55-day and the 100-day Simple Moving Averages (SMA), respectively, at 102.52 and 102.87 on the upside. Support held on Monday and is confirming continuation to the upside in order to challenge 103.61, the high of past Thursday. 

On the upside, 105.76 (200-day SMA) still acts as the big target to hit, as the next upside target at 104.00 (psychological level, static level) acts as an intermediary element to cross the open space.

On the downside, 102.86 (100-day SMA) aligns as the first support level to make sure that . In the case that breaks down, watch how the DXY reacts at the 55-day SMA at 102.48 in order to assess any further downturn or upturn. 


United States S&P Global Composite PMI

The PMI monthly Composite Reports on Manufacturing and Services, released by S&P Global, are based on a large number of business executives in private sector manufacturing and services companies. Data is usually released on the third working day of each month. Each response is weighted according to the size of the company and its contribution to total manufacturing or services output accounted for by the sub-sector to which that company belongs. Replies from larger companies have a greater impact on the final index numbers than those from small companies. Results are presented by question asked, showing the percentage of respondents reporting an improvement, deterioration, or no change since the previous month. From these percentages, an index is derived: a level of 50.0 signals no change since the previous month, above 50.0 signals an increase (or improvement), and below 50.0 a decrease (or contraction). Read more.

Next release: Thu May 23rd, 2023 13:45
Frequency: Monthly
Source: S&P Global


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