US Dollar sinks across the board even with China exports shrinking

• US Dollar is near several multi-month lows against major currencies. 
• The economic calendar puts the spotlight on the US Producer Price Index release. 
• The US Dollar Index said goodbye to 101.00 and is now pulled toward 100.00.

The US Dollar (USD) was in a sea of red on Wednesday when compared to several other major currencies. It was very hard to look for any green print as the Greenback lost substantial ground against all G10 currencies with notable losses against the Japanese Yen extending over 1%. On Thursday, the US Dollar was down nearly 1% against the Australian Dollar (AUD/USD) and the New Zealand Dollar (NZD/USD). The US Dollar Index (DXY) has been unable to catch a breath and is again on the back foot nearing the all important 100.00 line in the sand.

Thursday’s economic calendar has more inflation data coming in, this time from the producer side, as expectations will ramp up after the substantial lower US Consumer Price Index (CPI) in both its core and overall measure. The overall Producer Price Index (PPI) is expected to decelerate for the tenth month in a row. Moreover, an uptick in jobless claims could ignite another round of US Dollar weakness as recession fears might take over. 

Daily digest: US Dollar at risk for another round of selling

• The International Energy Agency (IEA) cuts its global oil demand outlook for 2023 as it sees the global economy slowing substantially in the last quarter of this year. 
• Chinese trade exports shrunk from -7.5% to even -12.4% for June as the nation is losing its title as biggest exporter of the world. 
• Some mild data to start at 11:00 GMT with the Mortgage Bankers Association issuing the Mortgage Applications for the first week of July. 
• Just one moment to look for on the economic calendar at 12:30 GMT: US Producer Price Index (PPI) to be released for both overall and core gauges, both on a monthly and yearly time frame. The Overall PPI on a yearly basis is expected to decelerate from 1.1% to 0.4%. The core PPI rise also expected to slow down from 2.8% to 2.6%. For the monthly performance, overall PPI is expected to head from -0.3% to 0.2% and the core to stay steady at 0.2%.
• Additionally, at the same time, the weekly jobless claims will come out. The initial claims are expected to rise from 248,000 to 250,000. The continuing claims to rise from 1,720 million to 1,723 million. The number will draw some additional attention as on Wednesday Senator Elisabeth Warren called on the Fed and its chairman Jerome Powell to “stop the madness” and stop hiking as the economy and labour force could be tipped into a recession with high unemployment possibly at hand. 
• Member of the Federal Reserve Board of Governors, Christopher Waller, is due to speak at 22:45 GMT. 
• The US Treasury is set to access the markets as well in order to allocate a 30-year bond auction, which will be interesting to see with these fast declining yields.  
• Equities across the globe saw a big push into risk assets as the safe haven Greenback retreated. Japans’ Topix index rose 1% at its closing bell, while the Chinese Hang Seng is up over 2.50%. European equities are mildly halfway through European trading while US equity futures are pointing to a nice 0.50% opening overall. 
• The CME Group FedWatch Tool shows that markets are stuck at 92.4% chance of a 25 basis points (bps) interest-rate hike on July 26. Chances of a second hike in November have dropped from 26.7% on Wednesday to 19.1%. It appears that markets are fully disregarding the remarks from the Fed on two more hikes, and presume that the Fed will hike in July for the last time. Markets expect US Fed Chairman Jerome Powell to announce that the pivotal level has been reached at the yearly Jackson-Hole Symposium between August 24 and 26. 
• The benchmark 10-year US Treasury bond yield trades at 3.82% and is continuing its slide lower from 4.09% last week. Traders have gone all-in and are calling the bluff of the Fed for at least two more hikes, while markets have fully priced in one hike and done. 

US Dollar Index technical analysis: Fireworks not over yet

The US Dollar on its sixth day of decline after one of the most brutal selloffs seen in a long time. It becomes clear that there is a complete division between the Fed and the markets after the US Consumer Price Index (CPI) has drawn a firm line between both parties. Markets have sold the US Dollar on all fronts which filters through into the US Dollar Index dropping 1% and has it nearing the psychological important 100.00 marker. 

On the upside, look for 102.77 to provide resistance at the 55-day Simple Moving Average (SMA) that will partially re-gain its importance after having been chopped up that much a few weeks ago. Only a few inches above the 55-day SMA, the 100-day SMA comes in at 102.88 and could create a firm area of resistance in between both moving averages. In case the DXY made its way through that region, the high of July at 103.57 will be the level to watch for a further breakout. 

On the downside the US Dollar price action is in orbit around 100.00. Expect to see several small new yearly-low prints to be unfolding throughout the day. Special notice for 99.42 which is a very important  technical support and once tested, would mean a new 18-month low for the DXY.