US Dollar clings to strong gains above mid-94.00s, US ISM PMI in focus

   “¢   Fed rate hike prospects help regain positive traction on Monday.
   “¢   German political jitters weigh on EUR and provide an additional boost.
   “¢   Traders now eye US ISM manufacturing PMI for some fresh impetus.

The greenback, as measured by the US Dollar Index (DXY), regained positive traction at the start of a new trading week and is currently placed at fresh session tops, around mid-94.00s.

Despite a modest retracement in the US Treasury bond yields, the index has managed to recover a part of Friday’s corrective fall and remains supported by the relative strength of the US economy/prospects of further Fed rate hikes.

Data released on Friday showed that the core PCE price index, the Fed’s preferred inflation gauge, rose by y/y in May, marking the biggest gain since April 2012, and reinforced expectations that the Fed will raise rates at two times by the end of this year.

Meanwhile, some renewed selling around the shared currency, led by some fresh German coalition crisis further collaborated to resurgent demand at the start of a new trading week. The CSU’s Seehofer threatened to bring the coalition to a grinding halt in wake of an escalating row over the current immigration agreement that has been made with other EU partner countries.

Moving ahead, important macro releases, scheduled at the start of a new month, including the keenly watched non-farm payrolls data will now be looked upon for some fresh directional impetus. In the meantime, the US ISM manufacturing PMI might assist traders to grab some short-term trading opportunities later during the early North-American session.

Technical levels to watch

Immediate resistance is pegged near 0.9467 level, above which the index is likely to aim towards challenging YTD highs resistance near the 95.00-95.10 region. On the flip side, the 94.30-20 area now seems to protect the immediate downside, which if broken might prompt some additional weakness back towards last Thursday’s swing low near the 93.85 level.