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US Dollar Hinges on Consumer Confidence as Virus Cases Climb

US Dollar Hinges on Consumer Confidence as Virus Cases Climb

2020-06-29 22:05:00
Rich Dvorak, Analyst
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US DOLLAR OUTLOOK: CONSUMER CONFIDENCE DATA EYED AMID RISING CORONAVIRUS SECOND WAVE RISK, FED CHAIR POWELL TESTIMONY ON TAP

  • US Dollar eyes upcoming consumer confidence data and a testimony from Fed Chair Powell
  • DXY Index lost upward momentum on Monday after rising for three straight trading sessions
  • USD price action has faced headwinds from FOMC support and unwavering investor optimism

The US Dollar, along with major stock market benchmarks, have maintained a holding pattern of indecision over the last several trading sessions. This largely corresponds with a juxtaposition of bullish and bearish drivers – like the Fed backstop and lingering coronavirus concerns as the trend in new virus cases re-accelerates. As traders search for a spark to fuel the next leg higher or lower, maybe this week’s jam-packed economic calendar could provide a catalyst with enough impetus to cause a break from recent ranges.

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Upcoming consumer confidence data set to be released by the Conference Board on Tuesday, June 30 at 14:00 GMT might take the spotlight with a focus on future expectations and labor market conditions in particular. This high-impact data release is scheduled to proceed a congressional testimony from Fed Chair Powell expected at 16:30 GMT.

DXY INDEX – US DOLLAR PRICE CHART: DAILY TIME FRAME (25 MAR TO 29 JUN 2020)

US Dollar Price Chart DXY Index Technical Outlook

Chart created by @RichDvorakFX with TradingView

Looking to US Dollar technicals, there is potential for the broader US Dollar to continue edging higher within its rising channel appearing from a series of higher highs and higher lows recorded throughout June. This bullish USD scenario could warrant more credence if the DXY Index can surmount confluent resistance posed by the 38.2% Fibonacci retracement level of the US Dollar basket’s 14 May to 10 June leg lower.

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On the other hand, measures of expected volatility, such as the S&P 500 VIX Index, could keep bleeding lower as consumer confidence improves and the economy recovers. This stands to weigh negatively on USD price action considering the US Dollar’s posturing as a top safe-haven asset. As such, it is possible that the apparent rising channel might actually chalk up to be a bearish flag pattern.

Keep Reading – S&P 500 Price Outlook: VIX ‘Fear-Gauge’ Falls as Oil Rises

USD PRICE OUTLOOK – US DOLLAR IMPLIED VOLATILITY & TRADING RANGES (OVERNIGHT)

USD Price Chart US Dollar Trading Outlook Consumer Confidence June 2020

In light of the conflicting fundamental drivers just mentioned, which seem to have facilitated relatively rangebound market activity, the US Dollar could continue to oscillate back and forth between key barriers of technical support and resistance.

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That said, receding measures of implied currency volatility suggest US Dollar headwinds could persist due to the lack of risk aversion and sustained improvement in trader sentiment. Nevertheless, it is worth noting how longer-term US Dollar outlook remains constructive considering that stocks face peril as day of reckoning looms.

-- Written by Rich Dvorak, Analyst for FxNews.com

Connect with @RichDvorakFX on Twitter for real-time market insight

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