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US dollar index trying to enter a correctional phase

The US currency was showing mixed dynamics on Monday. It’s fallen against the Aussie dollar, the Japanese yen, the British pound and the Canadian dollar, while appreciating against the Swiss franc, the single currency and kiwi dollar. Traders have struck a cautious tone today with Wednesday’s Fed meeting looming. According to the latest data from CME’s FedWatch, the probability of a 0.25% hike in interest rates is 3.1%.

The euro/dollar pair has corrected by 54 pips from a high of 1.1684 after hitting a new 52-week high. I believe that this downwards correction was brought about by technical factors. German and French statistics merely acted as a trigger. The services and manufacturing PMIs came out lower than expected.

The US is set to publish its preliminary services and manufacturing PMIs for July later on Monday. There will also be a report on existing home sales for June.

There’s a key support level at 1.1620 on the euro/dollar pair. Should this level be broken, we’ll start to see buyers closing their long positions, which will push the rate further down to 1.1580. The bullish trend is still strong. Moreover, the dollar is a mixed bag.

European statistics:

  • Germany: preliminary Markit services PMI – 53.5 (forecast: 54.3, previous reading: 54.0).
  • Germany: preliminary Markit manufacturing PMI – 58.3 (forecast: 59.2, previous reading: 59.6).
  • France: preliminary Markit services PMI – 55.9 (forecast: 56.7, previous reading: 56.9).
  • France: preliminary Markit manufacturing PMI – 55.4 (forecast: 54.6, previous reading: 54.8).

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