Financial experts from ING discussed the current state of the US dollar, noting that it is going through a phase of bearish consolidation rather than a significant decline.
The observation comes after the dollar saw a sharp decline of 5% since the beginning of July. The market forecast took into account a 100 basis point cut in the federal interest rate by the end of the year, with the final interest rate priced at 3.00%.
ING analysts believe that these expectations have paved the way for the dollar’s value to stabilize without further decline or significant appreciation.
The dollar’s recent price action is seen as part of a broader downtrend, which is evident from the participation of traditionally lagging Asian currencies, including the Korean won.
It should be noted that the options market is currently showing a preference for options to buy the Korean won, a trend not seen since 2007. This shift can be attributed either to investors rebalancing portfolios or Asian exporters engaging in late hedging the dollar.
In order to see the dollar’s downtrend resume, the ING Group points to the need for more negative surprises in the US activity data. However, the spot economic calendar, which highlights second-quarter GDP revisions and weekly initial claims, may not provide such stimulus. Initial claims have been consistently close to the 235,000 mark, with no large-scale job layoffs so far.
Federal Reserve Chairman Jerome Powell’s recent speech signaled some concern about the rapid deterioration of the labor market, hinting at possible future increases in jobless claims. However, ING expects the Dollar Index (DXY) to remain relatively stable within its current range. Analysts believe that a move just above the 101.60/65 threshold would signal a shift beyond what is currently seen as a bearish consolidation of the dollar.
Read also :Urgent: Dollar rises strongly after positive data and surpasses 101 level
This article was translated with the help of an artificial intelligence program after an editor’s review. For more details please refer to Banha Terms and Conditions
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