The US Dollar (USD) is a touch softer this Tuesday after European Purchase Managers Index (PMI) numbers for Germany and France partially outpaced the US PMI numbers for April. The biggest turning point is the fact that US Services fell below estimates while Manufacturing fell into contraction. When comparing all the data, the US is actually in the same position as both France and Germany with all three seeing services just a touch above 50, while the Manufacturing PMI's are in contraction for all three economies.
On the economic data front, all eyes will be on later this Tuesday with a very chuncky 2-year Bond Auction from the US Treasury department. The previous allocation was done at 4.595%, and might be even higher now. The cover ratio as well will be a very important factor with the US Treasury having to allocate a very big amount with debt rolling off and more and more packages being approved by Congress, which need to be allocated as well.
The US Dollar Index (DXY) is facing some retreat due to renewed Euro strength. The Euro accounts for 57.6% of the DXY Index composition and is thus the main driver for the index’s moves. With the US PMI data being released, markets are now able to compare the performances. Although the DXY is retreating now, the rate differential will still be at play and could limit or bar the DXY from selling off in the coming days.
On the upside, the high of April 16 at 106.52 is the level to beat. Further up and above the 107.00 round level, the DXY Index could meet resistance at 107.35, the October 3 high.
On the downside, the first important level is 105.88, a pivotal level since March 2023 (acting as a resistance at that moment and working as a support in November). Further down, 105.12 and 104.60 should also act as support ahead of the 55-day and the 200-day Simple Moving Averages (SMAs) at 104.17 and 103.91, respectively.
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