Minutes from July’s FOMC meeting were interpreted as hawkish, pushing the S&P 500, Nasdaq and Dow Jones lower on their close. APAC equities followed their lead, with all the top bourses finishing the Asian session lower. The support for the US Dollar was largely seen in the commodity complex in North American time but moved across into other currency pairs in Asia as AUD, CAD, CHF, EUR, GBP and JPY all sank against the Greenback. This illustrates the moves in markets were not a risk event as such, but rather a pure USD reaction to the FOMC minutes. The market seemed to take the document at face value, despite the fact that the meeting was several weeks before the Delta variant was as prevalent as it is now.

The Australian Dollar initially tried to run higher after the domestic unemployment rate came in at 4.6% against 4.9% prior and 5% expected. A stellar result, but the market looked through the stale data from July and re-focused on Delta variant cases and the length of lockdowns. Combined with USD strengthening, the AUD/USD made a new low for 2021 that may open up further moves lower.

The upcoming Jackson Hole symposium (26-28 August) will be a focus for markets going forward and we should expect several Fed talkers between now and then to ensure the markets are well prepared. In the near term, we have US jobless claims and an outlier here could provide some volatility.

US Dollar Technical Analysis

The US Dollar Index (DXY) may have found a base and is building for an extended move higher in the weeks and months ahead. Since finding support in late May, it has maintained a strong uptrend and is now testing the high of the year seen in late March.

US DOLLAR INDEX (DXY) – Daily Chart

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