Dollar Higher Again

The US Dollar is pushing higher through the back of the week, bolstered by rising safe-haven demand amidst ongoing uncertainty around the Iran war, and further US data strength. Fresh tit-for-tat attacks between the US and Iran this week is unnerving investors, with many fearing that the ceasefire will collapse and a full return to war will be seen. The lack of progress in negotiations and the risk of further attacks has seen risk assets recoiling and investors moving back into USD as a defensive position. Yesterday the House passed a resolution to force an end to the conflict with Iran. However, given that the resolution still needs to pass the Senate and achieve a more than 66% majority to avoid a presidential veto, the move is mostly seen as symbolic at this point and will have no impact on preventing further military action.

Strong US Data

On the data front, the US ISM services number came in stronger-than-forecast yesterday at 54.5, up from 53.6 prior and above the 53.7 the market was looking for. Alongside this the ADP employment number was seen rising to 122k from 105k prior,  above the 118k the market was looking for. These releases continue a recent strong of data strength which has been feeding into hawkish Fed expectations. Focus is now on tomorrow’s headline NFP release where any upside surprise should see USD rising firmly into the weekend.

Technical Views

DXY

The rally has seen price breaking back above the 99.15 level, now testing the May highs around 99.50. if we break higher here, focus will be on a test of the 100.36 level next, in line with bullish momentum studies readings. To the downside, 98.24 is the key support to watch.