22 Nov 2024

• The US Dollar Index (DXY) rallied to a fresh two-year high after Eurozone PMI data suggested the region’s economy is contracting.
• The US Dollar is also supported by safe-haven flows amid escalating geopolitical risks in the Russia-Ukraine war.
• The US Dollar Index pops above 108.00 and eases slightly afterward.
• The US Dollar (USD) surged on Friday, reaching its highest point in two years, with the DXY US Dollar Index exceeding 108.00. This increase was driven by Purchasing Managers Index (PMI) data indicating that the Eurozone's economy slipped back into contraction in November. This development significantly impacted the Euro (EUR), the primary foreign currency in the DXY, as it suggests the possibility of additional interest rate cuts by the European Central Bank (ECB) to stimulate growth.
  
  Earlier on Friday, the final assessment of the German Gross Domestic Product (GDP) was revised downward to 0.1%, indicating that the largest economy in the Eurozone experienced minimal growth in the third quarter.
  
  Compounding the Euro's decline, the US Dollar continues to receive support from safe-haven investments amid the intensifying conflict between Russia and Ukraine. Reports from Yahoo News indicate that Russia has prioritized a US military base in Poland as a target for its forthcoming retaliatory actions.
  
  The US economic calendar also includes the preliminary S&P Global PMI readings for November. Following the disappointing European PMI figures, strong results from the US could further bolster the US Dollar. Additionally, the final results of the University of Michigan Consumer Sentiment survey are set to be released.
• Daily market movers summary: Potential challenges ahead this Friday  
  Recent European PMI data has painted a discouraging picture for the Eurozone and its key economies. The Eurozone Composite PMI has decreased to 48.1 from 50, falling short of expectations and indicating a contraction in the region's economy. The data reveals that the services sector has entered a phase of contraction, while the decline in the manufacturing sector has intensified.  
  The individual PMI figures for France and Germany also largely failed to meet forecasts. In Germany, the data indicates that economic activity has contracted at the fastest pace in nine months, whereas in France, the contraction is the most severe since January.  
  Germany's Gross Domestic Product (GDP) for the third quarter has been revised down to 0.1%, from an initial estimate of 0.2%.  
  At 14:45 GMT, S&P Global is set to release the preliminary Purchasing Managers Index (PMI) for the United States:  
  The Manufacturing component is anticipated to rise slightly to 48.8 from the previous 48.5, remaining in contraction territory.  
  The Services PMI is expected to increase to 55.3 from 55.0.  
  The University of Michigan survey will issue its final reading for November at 15:00:  
  Consumer Sentiment is projected to improve slightly to 73.7, compared to the preliminary reading of 73.0.  
  Inflation expectations are anticipated to hold steady at 3.1%.  
  Equities are once again seeking direction, with Chinese stocks experiencing significant losses this Friday. The Shanghai Composite Index has dropped over 3% by the close. European equity indices are also declining, while US equity futures show modest gains.  
  The CME FedWatch Tool indicates a 55.9% probability of a 25 basis points (bps) rate cut by the Federal Reserve at the meeting on December 18, with a 44.1% chance of rates remaining unchanged. Although the scenario of an interest rate cut remains the most likely, traders have reduced some of their rate-cut expectations compared to a week ago, when the probability stood at 62%.  
  TheUS Dollar Index Technical Analysis: Headline Risks with Data Releases
  
  The US Dollar Index (DXY) is experiencing a slight increase, driven by recent European PMI figures indicating that the entire Eurozone is in a state of contraction. With US PMI data set to be released later today, it appears that the performance disparity between Europe and the United States has widened in favor of the latter. Anticipate potential profit-taking as the weekend approaches, which may lead to a reversal by the US market's closing time on Friday evening.
  
  Following the recent breakout, achieving a daily close above 107.00 is crucial before the weekend. A new two-year high has been established at 108.07, which now serves as the key level to surpass. Further upward, the significant level of 109.00 is the next target to monitor.
  
  On the downside, the initial support level is 105.89, a critical threshold since May 2. Just below this, the important level of 105.53 (the high from April 11) should help prevent any declines towards 104.00. If the DXY were to drop to 104.00, the significant figure and the 200-day Simple Moving Average at 103.95 are expected to provide support against further declines.
  
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