Categories: Forex News
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2023-09-29 1:20 PM

South Africa Monitors USD Slide Amid US Shutdown Concerns

  • The USD Index (DXY) has witnessed a decline for the second consecutive session, moving below the 106.00 support level after recently reaching 2023 highs close to 106.80.
  • Factors contributing to the dollar's drop include overbought conditions, profit-taking, rising risk appetite, and looming concerns about a potential federal government shutdown as the September 30 deadline approaches.
  • Key US economic indicators and events, such as PCE, Core PCE, Personal Income, and the final reading of the Michigan Consumer Sentiment, are set to influence the dollar's trajectory. Furthermore, the consistent performance of the US economy and the Federal Reserve's policy stance continue to underpin the greenback's strength.
By Nonhlanhla

As the global financial community observes, the US Dollar, represented by the USD Index (DXY), intensifies its recent decline, plunging beneath the significant 106.00 benchmark as the week concludes.

US Dollar Movements Centred on Domestic Metrics

South African investors and businesses with ties to the US continue to monitor the DXY, which registers a slide for the consecutive session this Friday. This descent arises post the DXY’s touch on its 2023 zenith at 106.80 (recorded September 27).

Fueling this dollar descent are several dynamics, including the index’s recent entry into overbought territory (as indicated by the daily RSI surpassing the 70-mark), a bout of profit booking, and a subtle resurgence in risk appetite.

Furthermore, while the monetary backdrop remains static, there’s heightened anxiety concerning a potential federal government shutdown as the September 30 deadline rapidly approaches. The upcoming US financial data release schedule is particularly dense, highlighted by figures on inflation via PCE and Core PCE, accompanied by statistics on Personal Income, Personal Spending, Advanced Goods Trade Balance, and the final reading of the Michigan Consumer Sentiment.

Additionally, remarks from NY Fed’s John Williams, known as a balanced permanent voter, are keenly anticipated.

Insights for the USD

The sudden recoil in the dollar is gaining momentum, with the slide already undercutting the 106.00 level on Friday. South African traders, particularly those involved in forex and import-export businesses, should remain vigilant.

Historically, the dollar’s resilience is attributed to the robust US economic landscape, further solidified by the Federal Reserve’s renewed focus on a protracted tighter monetary policy.

US’ Pivotal Events for the Week: The limelight is on PCE, Core PCE, Personal Income, Personal Spending, Advanced Goods Trade Balance, and the concluding Michigan Consumer Sentiment figures to be disclosed on Friday.

Pertinent Background Themes: Ongoing deliberations over the trajectory of the US economy—whether it’s heading for a smooth or abrupt slowdown. Emerging chatter about potential rate reductions come early 2024, and brewing geopolitical tensions involving Russia and China.

Essential USD Index Figures

Currently, with a decline of 0.33%, the DXY stands at 107.77. Its immediate support pegs at 104.42 (marked as the weekly low on September 11), followed by 103.09 (associated with the 200-day SMA), and subsequently at 102.93 (noted as the weekly nadir on August 30). In contrast, should the index surpass 106.83 (its 2023 pinnacle on September 27), it could pave the way towards 107.19 (the high of November 30, 2022) and eventually to 107.99 (the zenith of November 21 2022).

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Nonhlanhla

Nonhlanhla P Dube is a senior news reporter. Nonhlanhla is a student of International Relations at the University of South Africa. She reports primarily on personal finance and economics. You can contact her on: Email: nonhlanhla@rateweb.co.za