The US dollar remains on a high while crude oil floats. Is the USD higher?

US Dollar, DXY Index, USD, OPEC+, WTI, Brent, Crude Oil, Debt Ceiling – Discussion topics

  • The US dollar held on to Friday’s gains and started the week with high government bond yields.
  • OPEC+ cut production, with Saudi Arabia playing a key role in the rise in oil prices.
  • With the debt dilemma out of the way, the perception of Fed rates could drive the US dollar.

The US dollar was able to slightly extend its recovery from Friday on Monday as markets absorbed the OPEC+ production cuts announced over the weekend.

The USD was supported by a mixed labor market report on Friday, which was overall more positive than negative. So far, the start of the week has been quiet in the currency markets.

According to non-farm payrolls data, 339,000 new jobs were created in May. This exceeded expectations of 195,000, and the April figure was also revised upwards from 253,000 to 295,000.

However, the unemployment rate rose to 3.7% from 3.4% previously, exceeding the expected 3.5%.

APAC equity indices generally had a positive day after Wall Street ended last week with decent gains after the debt ceiling resolution lifted sentiment. Futures point to a cautious start to Monday.

Sentiment was lifted by China’s Caixin Purchasing Managers’ Index (PMI) for the services sector in May, which came in at 57.1 versus 55.2 and 56.4 previously expected.

Saudi Arabia is bearing the brunt of the cuts following the OPEC+ announcement to cut the cartel’s oil production. They will reduce their contribution to global supply by 1 million barrels per day.

The United Arab Emirates received an increase in its production target, while Russia’s remains unchanged.

Crude oil prices rose sharply at the open today but have since given back some of the gains, although prices are still above Friday’s close.

The WTI futures contract is at around $72.50 per barrel, while the Brent contract is trading just below $77 per barrel. Current prices can be viewed here.

Treasury yields remained high at the start of the week, with the 1-year bond remaining near a 23-year high of over 5.30%.

The Federal Open Market Committee (FOMC) meets next on 14 June and the lock-up period began over the weekend. This means that committee members will not comment publicly on policy until after the meeting.

In the US, new orders for factories and durable goods will be released after the consumer price index for Switzerland and the consumer price index for the eurozone. The RBA will decide on its monetary policy tomorrow, followed by the Bank of Canada on Wednesday.

TECHNICAL ANALYSIS OF DXY (USD) INDEX

The DXY index currently appears to be in a short-term sideways trend. Resistance could be in the 104.70 – 104.80 area, where last week’s high and the 76.4% Fibonacci retracement were.

On the downside, support could be at 103.38, the recent low, or 102.80, the breakout point.

Chart created in TradingView

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