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Fundamentals

During the Asian session on Tuesday (August 1), the US dollar index fluctuated to the upside, currently trading around 102.1. The dollar bottomed out in mid-July and has been rallying for two weeks, rising constantly from 99.4 to the 102.1 line. During this period, the market has been trading at the peak of inflation, while the trend of the dollar has moved abnormally higher at the end of the interest rate hike. The logic behind this needs to be understood. However, investors should be especially cautious, as bulls can sometimes switch rapidly to bears or vice versa, especially in the US dollar market. Actually, this rebound is more a way of a rebound correction after the deep fall in the early stage, which is under the blessing of US economic data. In the short term, the trend will be biased towards bulls. Currently, we need to understand the characteristics of the dollar, which is often over-traded and traded in advance. What is currently in front of us is the indisputable fact of the end of the rate hike, and the tail effect may not be able to support prices for too long.

Data: The US CPI YoY in June is 3% (not seasonally adjusted), which is lower than the expected reading of 3.1% and the previous reading of 4%. The US core CPI YoY in June is 4.8% (not seasonally adjusted), which is also lower than the expected 5% and the previous value of 5.3%.

Data for investors to focus on today include the unemployment rates for June in Japan and the Eurozone, as well as the final Markit manufacturing PMI for July in the Eurozone, the UK, and the US.

Technical Analysis

Trading at the daily timeframe, the MACD has formed a wide golden cross, and all moving averages are running upward. MA5 crossed MA10 and MA20 upwards, and the trend remains bullish. However, the dollar index has been in the downward box of the triangle since April. Currently, the price is around the upper edge of the box, testing its resistance and effectiveness, which is still valid for the time being. If the upper edge of the box is broken, the price is going to hit the high at 103, or even the resistance zone at 103.6. If this resistance works, the target below should initially focus on MA5 at 101.600 and MA20 at 101.200, which is also the pivot position. Another important support should further pay attention to the 100 integer mark.

Investors are recommended to seize the opportunity to take short positions after the price rebounds. If the dollar bounces back to the 102.2-102.3 area, aggressive traders can go short with a small position to stop the loss. The stop loss is set at 102.500, and the first target of take profit is 101.600, where you can reduce positions and move your stop loss to break even. The second target to take profit should focus on 101.200.

Trading Recommendations

Trading Direction: Short

Entry Price: 102.300

Target Price: 101.200

Stop Loss: 102.500

Support: 101.600/101.200

Resistance: 102.500/103.000