The US dollar unexpectedly fell significantly in July. In just 7 days, it went straight from above 103 to about 400 points and fell to around 99.30. It fell below the 100.50/101.00 support area that has been undertaken many times this year. Mainly due to the slightly lower-than-expected growth in non-agricultural jobs in June and the further improvement in inflation, there are more confidence on the market in the Fed's interest rate meeting in July. It is likely to be the last rate increase in this rate hike cycle, and interest rates will remain unchanged for the rest of the year.

At the time of writing, it was less than 48 hours before the interest rate meeting. Investors are concerned about whether Chairman Powell’s post-meeting speech will have a clear statement on the future monetary policy, and even put an end to the tightening cycle. I believe that the slowdown in economic and inflation growth is a fact, but due to the great uncertainty in the market outlook, it is not enough for the bureau to issue a victory declaration against inflation for the time being. It is estimated that the probability of a dovish statement after the meeting is not high. Previously, we saw that the central banks of Australia and Canada had repeated monetary policies, and the peak of global inflation should have appeared. However, price pressures are likely to persist, and the central bank will be more willing to wait and see how the situation develops at an appropriate time. It will not rashly end tightening actions. 

Judging from the current fundamental factors, the US labor market is still stable, consumer confidence and retail sales are also maintaining a good trend. US dollar index should not have too much pressure. However, the exchange rate tried to rebound from 100/101 twice this year from the analysis of technical trends, and was blocked before the 106 mark for the first time. The second time it stopped before 105, the rebound showed a downward trend, and finally fell below the support area of ​​this year. 

When I was writing, it rose back to around 101, and it is estimated that it will gradually encounter resistance. It is not easy to go back to 102. Judging from the weekly and monthly charts, the more sensitive short-term moving average is turning down. The support of the long-term ascending channel is around 94, so we need to pay attention to the short-term rebound performance. Once the rebound is slow down or there is news that is unfavorable to the US dollar, be careful that there will be a sharp drop in the US dollar index. The initial target is 97.

Patrick Law

Chief Operating Officer of Hantec Group