Although the dollar index futures are up today:
+0.22 (0.24%) at 92.25
it would take a move back above 93.00 to really hammer commodity prices.
Which is what we've been waiting (patiently) for; to get a final washout in copper futures.
And that will take some real enthusiasm on the part of dollar buyers (resistance just above 93 was the stopper three times in the last month)
From Marc to Market, Sunday August 5:
The key question in the foreign exchange market is if the disappointing jobs data confirms and solidifies the dollar's downtrend that has emerged over the last couple of weeks. For many, the answer seems to depend on if the downside surprise was sufficient to delay the Fed's plans to reduce its bond-buying.
The Fed has not provided a timeline, but it seems that tapering this month is too soon, given the Fed's leadership comments, and was never really in the cards. We suspect that among top-of-mind issues at the Fed is to avoid a taper tantrum, though better it begins with 10-year yields around 1.30% than 1.70% where they were earlier this year. Chair Powell has repeatedly committed the Fed to give the markets ample notice. The July FOMC minutes do not count as ample notice. A formal statement about tapering before the end of the year must work its way into the FOMC statement. That makes tapering a November or December event. Although it may make a difference to some market segments, it may be a difference without a distinction for many, if not most, businesses and investors.
In the medium-term, we remain concerned that the twin deficits the US chronically records require a higher interest rate premium or the dollar bears the burden of the adjustment. From a technical perspective, we can understand the dollar's strength this yearas retracing part of the sell-off that began in late March 2020. However, in the long-term, we still see the dollar having ended its third significant bull market since the end of Bretton Woods.
In the short term, the two-week dollar sell-off looks overdone. And with that bias, we review the technical condition of the various currencies.
Dollar Index: The Dollar Index gave back August's gains with a dip below 92.00 in response to the disappointing employment report. The late July/early August lows were set around 91.80. The year's high was recorded on August 20, a little below 93.75. Although the downside momentum ahead of the weekend was not sustained, the 10th decline in 11 sessions may be more indicative. The MACD is at levels not seen since the second half of June, and the Slow Stochastic is back to May levels in oversold territory. The two-week drop overshot the (38.2%) retracement objective of the rally since late May around 92.15, corresponding to the lower Bollinger Band. The next retracement target (50%) is by 91.65....
....MUCH MORE
