The USD Index ends the first half of the year on a bearish note as the FED appears to shift course on monetary policy. Powell indicated in his latest speech that rate cuts will largely depend on the economic data flow in the coming months which makes this month’s NFP release very important. Furthermore, the USD has also, been impacted by Trump rhetoric for a weaker Dollar to boost US competitiveness against major trading partners. Below we present a series of USD related charts for your consideration.
1. USD Index Monthly – Bearish wave count
Any sustainable Dollar bear trend MUST be backed with the narrowing of the US-GER rate differential (panel 3). We need to keep in mind that the FED is reacting to deteriorating global growth prospects and IF they do cut rates then it is highly probable that the ECB and BoJ may respond the same way plus introducing asset purchase programs which could mitigate any downside in the USD. Watch the rate differential closely.
2. USD Index Daily – Bearish pattern looks complete
3. Inflation expectations need to improve to boost commodity demand and weigh on the USD. US/China trade talks a KEY trigger.
4. USD/Commodity ratio at KEY support after mean reversion. Make or Break inflection point.