US Dollar Gains Momentum: Asia Markets Watch

Richmond Manufacturing Index rises, boosting the US dollar. This article covers the impact on Asian markets, key events, and central bank updates.

US Session Highlights

In a notable shift, the Richmond Manufacturing Index climbed from -7 to 0 in May, signaling improved manufacturing activity in the Fifth Federal Reserve District. This region encompasses Maryland, North Carolina, the District of Columbia, Virginia, most of West Virginia, and South Carolina. Key sub-components such as shipments and new orders increased while employment levels declined. Despite sluggish activity, the dollar index (DXY) surged, gaining 0.5% overnight. Weak sales of U.S. Treasuries fueled this rise, driving yields higher and consequently boosting the dollar.

Implications for the Asia Session

With the DXY breaking above its near-term resistance of 105, now trading around 105.15, and spot gold prices dropping from $2,360/oz to as low as $2,333/oz, the demand for the dollar has notably increased. This trend will likely continue, pushing the DXY higher as the day progresses.

The Dollar Index (DXY)

Key News Events Today

• Preliminary GDP (12:30 pm GMT)
• Unemployment Claims (12:30 pm GMT)

DXY Outlook

The advance estimate for first-quarter GDP came in at 1.6% YoY, below the forecast of 2.5%. The preliminary estimate points to a reading of 1.2%, indicating a further slowdown in the US economy. The dollar could face intense selling pressures if this update misses market expectations. On the other hand, a second consecutive week of lower-than-anticipated unemployment claims could bolster the dollar. The latest reading showed 215K claims, below the 220K estimate, with the 4-week average at 219K.

Central Bank Notes

The Federal Funds Rate target range remains at 5.25% to 5.50%. The Fed focuses on maximum employment and 2% inflation over the long term, noting balanced risks to achieving these goals. The Federal Reserve will hold its next meeting on June 11-12, 2024.

Next 24 Hours Bias: Weak Bearish

US Dollar Gains Momentum: Asia Markets Watch

Gold (XAU)

Key News Events Today

• Preliminary GDP (12:30 pm GMT)
• Unemployment Claims (12:30 pm GMT)

Gold Outlook

Like the DXY, the GDP will influence gold price movements and unemployment claims data. Any disappointment in the GDP figures could lead to strong selling pressures on the dollar, boosting gold prices. Expect higher volatility for gold during the US session.

Next 24 Hours Bias: Weak, Bullish

The Australian Dollar (AUD)

Key News Events Today

• No major news events.

AUD Outlook

Strong demand for the U.S. dollar drove the Aussie to an overnight low of 0.6606. This pair was trading around 0.6615 as Asian markets opened. Key support and resistance levels are at 0.6590 and 0.6670, respectively.

Central Bank Notes

The RBA kept the cash rate target at 4.35%. The forecast predicts inflation will return to the target range of 2-3% by the second half of 2025. The RBA will hold its next meeting on June 18, 2024.

Next 24 Hours Bias: Weak, Bullish

The Kiwi Dollar (NZD)

Key News Events Today

• No major news events.

NZD Outlook

The Kiwi tumbled overnight, trading around 0.6105 at the start of the Asia session. Key support and resistance levels are at 0.6090 and 0.6140, respectively.

Central Bank Notes

The OCR remains unchanged at 5.50%. The next meeting is on July 10, 2024.

Next 24 Hours Bias: Weak, Bullish

The Japanese Yen (JPY)

Key News Events Today

• No major news events.

JPY Outlook

The yen weakened, with USD/JPY hitting an overnight high of 157.70. This pair was trading around 157.40 as Asian markets opened. Key support and resistance levels are at 156.60 and 158.00, respectively.

Central Bank Notes

The Bank of Japan maintains its QQE with Yield Curve Control and a negative interest rate policy. The next meeting is on June 14, 2024.

Next 24 Hours Bias: Weak Bearish

The Euro (EUR)

Key News Events Today

• No major news events.

EUR Outlook

The Euro fell to around 1.0795 at the start of the Asia session. Key support and resistance levels are at 1.0790 and 1.0840, respectively.

Central Bank Notes

The ECB kept interest rates unchanged, with the next meeting on June 6, 2024.

Next 24 Hours Bias: Weak Bearish

The Swiss Franc (CHF)

Key News Events Today

• GDP (7:00 am GMT)

CHF Outlook

Analysts expect Switzerland’s GDP to grow by 0.3% QoQ in Q1. A positive surprise could lift the franc.

Central Bank Notes

The SNB lowered its key policy rate to 1.50%. The next meeting is on June 20, 2024.

Next 24 Hours Bias: Weak, Bullish

The Pound (GBP)

Key News Events Today

• No major news events.

GBP Outlook

Cable was trading around 1.2690 at the start of the Asia session. Key support and resistance levels are at 1.2690 and 1.2790, respectively.

Central Bank Notes

The Bank of England maintained its Official Bank Rate at 5.25%. The next meeting is on June 20, 2024.

Next 24 Hours Bias: Weak Bearish

The Canadian Dollar (CAD)

Key News Events Today

• No major news events.

CAD Outlook

The Loonie weakened, with USD/CAD trading around 1.3720 as Asian markets opened. Key support and resistance levels are at 1.3690 and 1.3740, respectively.

Central Bank Notes

The Bank of Canada held its overnight rate at 5.0%. The next meeting is on June 5, 2024.

Next 24 Hours Bias: Weak Bearish

Oil

Key News Events Today

• EIA Crude Oil Inventories (3:00 pm GMT)

Oil Outlook

API stockpiles signaled higher demand in the U.S., with a decline of 6.5M barrels. A larger-than-expected drawdown in EIA inventories could boost oil prices. WTI was trading around $79.70 this morning.

Next 24 Hours Bias: Medium Bearish

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