Forex Today: Fresh highs for the DXY ahead of the Fed

 Market participants digest the PMIs while awaiting the Fed and the ECB meetings. No relevant data is due during the Asian session. Later in the day, the German IFO survey is due, followed by housing data from the US.

Here is what you need to know on Tuesday, July 4:

US stocks rose despite softer PMIs. The market expects rate hikes from the Federal Reserve (Fed) and the European Central Bank (ECB) this week but hoped that it would mark the end of the tightening cycle. The Dow Jones gained 0.52%, and the Nasdaq rose 0.19%. Microsoft and Alphabet will report earnings on Tuesday. US data due on Tuesday includes the CB Consumer Confidence and the Case-Shiller Home Price Index.

US Treasury yields rose to the highest level in two weeks ahead of the Fed meeting, supporting the US Dollar. The DXY rose for the fourth consecutive day, ending around 103.40, the highest level since July 12.

• US: S&P Manufacturing PMI improves to 49, Services PMI declines to 52.4 in July

EUR/USD resumed its bearish correction and dropped to 1.1060, reaching the lowest level in 12 days. Eurozone PMI data showed that recession risks are intensifying in the region. On Tuesday, the German IFO survey is due. On Thursday, the European Central Bank (ECB) is expected to raise its key interest rates by 25 basis points.

GBP/USD dropped for the seventh consecutive day and finished slightly above 1.2800 but below the 20-day Simple Moving Average (SMA) for the first time in a month. The UK also reported soft July PMIs, which continue to lower tightening expectations from the Bank of England. Still, a rate hike in August is expected, but the odds of a 50 basis point increase have eased.

USD/JPY finished flat around 141.50 after a recovery during the American session, boosted by higher US Treasury yields. The Bank of Japan on Friday is expected to keep its monetary policy stance unchanged; however, reports suggest that it will raise its inflation forecasts.

AUD/USD rebounded from the 20-day SMA and traded slightly higher around 0.6735. The pair still holds a bearish tone, but it offered signs of stabilization supported by risk appetite and hopes for Chinese stimulus. On Wednesday, Australia will report inflation.

NZD/USD rose after falling for seven consecutive trading days but failed to hold above 0.6200. The Kiwi outperformed; however, the pair still faces bearish pressure and remains below the 20-day SMA.

USD/CAD lost more than 50 pips, falling below 1.3200, favored by higher crude oil prices. Crude oil prices rose more than 2%, with WTI hitting the highest level since mid-April above $79.00.

Gold tumbled amid higher yields, falling toward the $1,950 zone, while Silver lost more than 1%, breaking under $24.50.