All year the USD has threatened to break down on fundamentals and geo-politics, yet the technical trends have won out. DXY threatened to punch through 94 and then 96 has come and gone constantly as the EUR, JPY and EM FX slide. It has been a constant irritation of the President and one that looks to have finally feasted into a full blow boil and seen him accuse nations of currency manipulation. A theme that will only increase into 2020 as we approach the Presidential election.
Then there is the Macro and the growing divergence in data between the globe and the US. Global data stabilisation is beginning. Over half of manufacturing PMIs ex-US has ticked up in November, the highlight being China with Caixin and State manufacturing PMIs rebounding. Trade activity is showing signs it has bottomed while credit growth ex-US is rising at the fastest pace in 36months.
The US on the other hand, has seen its most important data miss expectations. ISMs, ADP employment, and construction spending. The most worrying of all was the readings in the ISM non-manufacturing business activity index which registered a nine-year low. The private payroll growth was also weak. The switch is coming, and although this has been a gradual shift the signs on a macro level are a USD-weakness theme.
However technically DXY and USD major pairs remain in positive momentum.
It looks like it could test the ascending channel, however the sell-off does suggest it could be oversold and some buy will come in. However, it is well below the 50-day moving average and a break down here could sign a double blessed situation of the fundamentals and techincals aligning.
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