Dollar holds below mid-94.00s

4 July, 2018

Lingering trade war fears keep the USD bulls on the defensive. Thin liquidity conditions also hold traders from placing aggressive bets. This week’s important releases might help determine the near-term trajectory. 

The greenback, as measured by the US Dollar Index reversed an early dip to over one-week lows and is currently placed just below session tops touched in the last hour.

The index found decent support ahead of the 94.00 round figure mark but lacked any strong momentum amid heightened trade tensions. Investors remained cautious ahead of a July 6 deadline when the US is set to impose fresh tariffs of up to $50 billion on Chinese products. 

With the US markets closed in observance of Independence Day, holiday-thinned liquidity conditions could also be one of the factors holding traders from placing any aggressive bets. 

Moving ahead, this week's key event risks, including the latest FOMC meeting minutes and the release of keenly watched US non-farm payrolls data, will influence investors expectations over the Fed's monetary policy outlook for 2018. 

This coupled with other important US macro releases - ADP report on the private sector employment and ISM non-manufacturing PMI should further contribute towards making it an eventful week for the buck. 

The 94.10-94.00 region might continue to protect the immediate downside and is followed by last Thursday's swing low near the 93.85 level, below which the index is likely to 93.50-45 support area.

On the upside, the 94.65-70 area now seems to have emerged as an immediate hurdle, above which the momentum is likely to get extended back towards YTD highs near the 95.00-95.10 region, set last Thursday.

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