US Dollar (DXY): Weaker as US Factory Orders, Job Openings Decrease

Highlights

• US job openings down to 9.9M
• U.S. factory orders decline second month
• Sterling and Euro rise to multi-month highs

Overview

Weak economic data suggested that the Federal Reserve is nearing the end of its tightening cycle, causing the U.S. dollar to sharply fall against a basket of currencies. Additionally, investors expect other major central banks to keep raising rates to tackle high inflation, reducing the attractiveness of the dollar as an investment.

On Tuesday, June U.S. Dollar Index futures settled at 101.267, down 0.520 or -0.51%. The Invesco DB US Dollar Index Bullish Fund ETF (UUP) finished at $27.63, down $0.12 or -0.45%.

US Dollar Drops as Job Openings and Factory Orders Decrease in February

The decline in the dollar can be attributed to the decrease in job openings and factory orders in the U.S. in February. Job openings fell by 632,000 to 9.9 million, the lowest since May 2021, according to the JOLTS report. This report suggests a moderation in the labor market.

Additionally, U.S. two-year Treasury yields, which are a reflection of interest rate expectations, dropped 12 basis points to 3.86%. U.S. factory orders also declined for the second consecutive month, down 0.7% in February after falling 2.1% in January.

Sterling, Euro Jump to Multi-Month Highs

On the other hand, sterling rose to a new 10-month high against the dollar, and the euro reached its highest since February. The pound was up 0.7%, and the euro was up 0.4%, with traders convinced that the European Central Bank has more rate hikes to come.

Bleak Outlook for US Dollar

Overall, analysts predict that the dollar has reached its peak and is unlikely to recover in the near future. The poor economic data, coupled with a banking crisis and an increase in oil supply costs, may result in more favorable odds for rate cuts next year. Some traders predict that the euro will reach $1.15 against the dollar in the second half of the year.

Technically Speaking…

Bearish momentum is driving the price action with the daily chart indicating the Feb. 2 main bottom at 100.345 is the next downside target. It’s tough to get excited about the long side at current price levels unless you are a bottom picker.