- U.S services sector grows faster than market expectations.
- DXY stretched past 110, and bullishness continues.
- Fed will likely keep tightening the financial policy.
The dollar index maintains its upsides following the latest ISM data release. The United States services industry continued to soar in August (according to the better-than-anticipated data). Meanwhile, the Federal Reserve will likely keep its tightening stance as the United States economy deteriorates. Thus, the present U.S dollar strength is logical, and market players can expect the same in the coming sessions.
ISM Services PMI Highlights Consistent Growth in Services Sector
Numbers beyond 50 indicate a growing sector. Meanwhile, yesterday’s 56.9 print remains lucrative for two reasons. First and foremost, 56.9 remains well beyond 50. That confirms solid growth. Secondly, the United States economy remains service based. Thus, the services sector accounts for more of the nation’s Gross Domestic Product than the manufacturing industry.
Three tracked components emerged beyond 60 – New Orders, New Export Orders, and Company Activity. Another impressive news is inventories are plummeting while employment began to grow in August. Everything supports the present economic strength. The dollar has nothing that might weaken its momentum soon.
Dollar Index Climbs Past 110
DXY bottomed early in 2021 and printed a double bottom setup during last year’s initial five months before welcoming a bullish run. Any bullish trend comprises multiple lower lows and higher highs. Moreover, the bias remains intact, provided these lows and highs persist. Yesterday’s climb past 110 represents the bullish move, and only a dip beneath the 104 pivotal reflects possible reversals.
Fed to Keep Tightening
Why is the dollar retaining its strength? Most debates during the summer months involved the possibility of the U.S Fed stopping the tightening cycles amidst a gradual economic recovery. Nevertheless, there’s no economic weakness signal – only the opposite.
Thus, yesterday’s updates backed last Friday’s massive labor market report. DXY’s bullish run should extend as the Federal won’t halt tightening soon. What are your thoughts about the strengthening dollar? Feel free to leave a reply in the comment section below.