The US dollar falls out of bed on Monday after very mixed ISM data

The US dollar is depreciating after very mixed ISM data.
Markets are in positive territory, Europe is up nearly 1%, and US stocks are trying to follow suit.
The US dollar index is trading around the mid-104.00 level, although it drops to 104.00 after the ISM release.

The US dollar (USD) is falling on Monday, with data from the Institute for Supply Management (ISM) being the biggest factor weakening the dollar. These moves come after various data points indicate that easing is imminent. The employment component has shrunk even further, which could be a sign on the horizon that this week’s U.S. jobs report and its nonfarm payrolls component could turn ugly.

Once all the data points for Monday are out of the way, investors will begin to prepare for Tuesday. The Factory Orders Report and the US JOLTS Job Vacancies Report will confirm whether the US labor market is no longer as tight as traders thought. Already on Monday, it becomes clear that this will be a key week for the US dollar index (DXY).

Daily summary of market changes: ISM split, and this is bad news

Monday’s calendar in the US began with the publication of the final S&P Global Manufacturing PMI index for May. The final reading was 51.3, which was higher than the value of 50.9.
At 14:00 GMT, the Institute for Supply Management published its latest findings from its monthly survey for May:
- The main manufacturing PMI index fell from 49.2 to 48.7.
- The employment rate increased from 48.6 in April to 51.1 in May.
- The New Orders Index dropped from 49.1 to 45.4.
- The price paid index also dropped from 60.9 to 57.
- Construction spending is expected to boost by 0.2% in April, after falling by 0.2% in March.
Shares across Europe are in positive territory, but US stocks are struggling as the Dow Jones reports technical issues.
According to the CME Fedwatch Tool, Fed Fund futures price data indicates that there is a 46.1% chance of interest rates remaining unchanged in September, compared with a 47.2% chance of a 25 basis point (bps) rate cut and 6.7% chance of an equal 50 basis point cut. An interest rate boost is no longer considered.
The benchmark 10-year U.S. Treasury note is trading around 4.41% and heading towards the lower end of the monthly range between 4.34% and 4.61%.

US Dollar Index Technical Analysis: Consolidation Ends This Week

The US Dollar Index (DXY) was a bit stuck in no man’s land on Monday after last week’s negative results. Looking at the weekly chart, DXY is clearly in consolidation, making lower highs and higher lows as sellers and buyers are pushed towards each other. In this context, a breakout usually occurs then, which could happen this week given the very busy economic calendar ahead.

On the other hand, the DXY index regained the key round level of 105.00, which is broadly aligned with the 55-day elementary moving average (SMA). It will be critical whether these levels maintain support should US data weaken. Once this is proven, look for 105.52 and 105.88.

On the other hand, the last line of defense is the 200-day SMA at 104.44 and the 100-day SMA at 104.42. Once this level snaps shut, the air pocket will be placed between 104.30 and 103.00. If the decline in the US dollar continues, consider the March low of 102.35 and the December low of 100.62.