Dollar stays soft in Asian session as markets are pricing out the chance of rate hike by Fed after the much weaker than expected Q2 GDP report released last week. But Fed officials are trying to talk down the impact of the data. New York Fed president William Dudley noted that "compared to the start of the year, the expected timing of any further Fed interest rate hikes has been pushed back." And "directionally, the movement in investor expectations towards a flatter path for U.S. short-term interest rates seems broadly appropriate." But he warned that "it is premature to rule out further monetary policy tightening this year." San Francisco Fed president John Williams said "there's definitely a data stream that could come through in the next couple of months that I think would be supportive of two rate increases." Dallas Fed president Rob Kaplan also said that he wouldn't "overreact to one data point," and "we're still hopeful for solid GDP growth this year, and the basis for that is the consumer."
Dollar index's sharp fall last week argues that rebound from 91.91 has completed at 97.56. And, the structure now suggests that such rebound could be a corrective move, which carries bearish implications. We'll turn neutral on the index first and focus is now on near term channel support (now at 93.8). Further rise is mildly in favor as long as the channel support holds. Above 97.56 will revive the case that consolidation pattern from 100.39 has completed and target a test on 100.39/51 resistance zone. However, sustained trading below the channel support will likely pave the for another low below 91.91 to extend the consolidation pattern from 100.39.
The sharp fall in 10 year yield also suggests that rebound from 1.336 has completed at 1.628. More importantly, rejection by the 55 days EMA maintained bearishness. Deeper fall could be seen back to 1.336 low in near term. And break will extend the larger down trend. Such development could also weigh down the greenback.
Released from China, official manufacturing PMI dropped to 49.9 in July versus expectation of 50.0. Non-manufacturing PMI rose to 53.9. Caixin manufacturing PMI rose to 50.6 in July versus expectation of 48.9. Caixin noted in the report that "Driving the headline index higher in July was a renewed rise in total new business. Though moderate, it was the first time that overall new orders had increased since March." PMI data will be the main focus for today as Eurozone and UK will release PMI revision. US will release ISM manufacturing.