Key points
The US dollar index (Symbol: USDX) as expectations of an interest rate cut grows stronger as the spotlight shifted to economic data for more clues on the monetary policy path of the Federal Reserve.
The US dollar index losing strength as Fed rate-cut expectations grow, as observed on the VT Markets app.
The dollar eased following US President Joe Biden’s decision to end his reelection campaign, which opened the path for another Democrat to challenge Donald Trump. A weaker dollar makes bullion more attractive to buyers holding other currencies.
The markets will be watching for the personal consumption expenditures (PCE) data of the US this Friday, along with other key releases this week, including existing home sales, July S&P Global flash PMIs, advance second-quarter GDP, and weekly jobless claims.
Geopolitical tensions, particularly between the United States and China, have also become a significant concern for sovereign wealth funds and central banks.
An Invesco survey indicated that these tensions now trump inflation as the biggest worry.
The current momentum of the US dollar could offer opportunities for traders to capitalise opportunities to profit. Monitoring key support and resistance levels will be crucial.
Given the significant geopolitical and economic factors at play, volatility is expected. Traders might consider strategies that capitalise on price swings, such as straddles or strangles.
The upcoming economic data releases, particularly the PCE report and GDP numbers, will be critical. Traders should stay agile and be prepared to adjust positions based on these reports, as they could significantly impact market sentiment.
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