Dollar Loses Steam!
The US dollar's strengthening momentum began to weaken after the market postponed expectations for a Federal Reserve interest rate hike. The US dollar index (DXY) is currently (July 6) hovering around 100.7–101.0, having been pressured by weaker-than-expected US employment data.
Disappointment with the June US employment report was the main driver of the shift in market expectations. Nonfarm Payrolls data added only 57,000 jobs, well below the forecast of around 110,000–115,000. Furthermore, April and May data were also revised downward, leading the market to see clearer signs of a cooling in the US labor market.
Following the release of this data, traders began to postpone their expectations for a Fed rate hike. Initially, the market still saw the possibility of a faster rate hike, but expectations have now shifted further to the end of the year. This condition has also put pressure on the dollar sentiment indicator as buying interest in the greenback has begun to wane.
However, the US dollar has not yet fully entered a bearish trend. The DXY remains hovering around the 101 area, and Reuters notes the dollar has stabilized after last week's decline as markets await clues from the June FOMC meeting minutes. Furthermore, the Japanese yen remains near a 40-year low of around 162 per US dollar, providing continued support for the dollar.
The dollar also retains an interest rate advantage over several major G10 currencies. However, this advantage is not strong enough to sustain a rally if the Fed fails to take concrete action. The market now needs clearer evidence, not just signals from central bank officials.
Under current conditions, the dollar's rally, driven by interest rate expectations, is likely entering a pause phase. As long as the DXY remains above 100.50, there is still room for consolidation. However, if it falls below that level, selling pressure could extend to around 100.00. Conversely, if the DXY breaks through 101.50 again, there is a chance for a rebound to 101.80–102.00. (yds)
Source: Newsmaker.id
