Best Forex Strategies: US Dollar’s Persistent Downtrend

Best Forex Strategies: US Dollar’s Persistent Downtrend

The US Producer Price Index (PPI) showed a modest 0.1% rise in June compared to the previous year, marking the lowest reading since August 2020. Additionally, Initial Jobless Claims came in at 237,000 for the week ended July 8, indicating a decline from the previous week. Despite the easing inflation, the Federal Reserve is still expected to raise interest rates by 25 basis points on July 26. However, market participants are increasingly looking for the best Forex strategies, speculating that this could be the final hike of the tightening cycle. On Friday, the University of Michigan will release its Consumer Confidence report, adding further insight into the US economic outlook.

US Dollar Index (DXY) Hits Lowest Level Since April 2022

The US Dollar Index (DXY) dipped below 100.00, reaching its lowest level since April 2022. The decline in the DXY has persisted for six consecutive days with no signs of stabilization. The bearish momentum surrounding the Dollar remains strong, suggesting potential further losses.

Meanwhile, Wall Street continued to react positively to the inflation figures, with the Dow Jones rising 0.14%, the S&P 500 reaching its highest close since April 2022 with a gain of 0.85%, and the Nasdaq climbing 1.58%. Commodities also experienced upward momentum, as Silver extended its weekly gains by 3% to reach $24.85, while Gold maintained stability around $1,960.

Despite weak trade data from China, including a 12.4% year-on-year decline in exports (the largest contraction since February 2020) and a 6.8% rise in imports, global equity markets remained optimistic. The disappointing numbers increase pressure on Chinese officials to implement further stimulus measures.

Global Equity Markets Remain Optimistic Despite Weak Trade Data from China

The EUR/USD pair soared to 1.1225, maintaining its upward trajectory with intact bullish momentum. The European Central Bank (ECB) minutes hinted at a potential rate hike in July. On Friday, the European Commission is set to release economic growth forecasts and trade balance data, which could provide further insights into the Eurozone’s economic performance.

GBP/USD continued its daily gains, surpassing the 1.3000 and 1.3100 levels to reach its highest point in 15 months. UK GDP data for May showed a contraction of 0.1%, outperforming the anticipated -0.3%. Additionally, Industrial Production indicators for May exhibited a decline, albeit less severe than projected. The British Pound remains resilient, even as expectations of tightening measures by the Bank of England soften.

USD/JPY extended its decline for the sixth consecutive day, reflecting the weakness of the US Dollar and the downward trend in government bond yields. The pair approached the 138.00 level as the Japanese currency benefited from risk aversion in the market.

Focus Turns to Economic Data Releases and Central Bank Actions

Antipodean currencies, such as the Australian Dollar (AUD/USD) and the New Zealand Dollar (NZD/USD), continued to benefit from the weaker US Dollar and the positive sentiment in equity markets. AUD/USD surged towards 0.6900, testing June highs and achieving its highest daily close since February. NZD/USD reached its highest level since early February, coming close to the 0.6400 mark.

USD/CAD closed at 1.3100, its lowest level since August 2022. On Friday, Canada will release May Manufacturing Sales data, which could provide further direction for the Canadian Dollar. Despite a 2% increase in crude oil prices, the Canadian Dollar lagged behind its Australian and New Zealand counterparts.