USD: BBDXY - Struggling To Extend Below 1180, Could It Be A False Break ?
The BBDXY range overnight was 1175.40 - 1182.97, Asia is currently trading around 1183. The Dollar had a bounce in the N/Y session thanks to what looked like month-end corporate USD demand which caught the market a little wrong-footed. Once the flow was executed most currencies drifted back to where they had started the day, but that sort of move might encourage traders with decent PnL to take something off the table as we head into a weekend filled with event risk. There is a possible US shutdown, a potential Iran strike and President Trump is set to announce the new Fed Chair, who Polymarket is favouring to be Kevin Warsh. The latter seems to be giving the USD another wave of buying and this is cascading into other asset classes like metals as everyone is in on the “debasement trade". On the day, the USD looks to be struggling to extend below 1180 and it could be a false break, liquidity also seems to be falling adding to the outsized reaction of the moves. If the move can break back above 1184-1186 then it could signal a deeper pullback to the 1190-1195 area where I suspect sellers could remerge as we approach the 1200 area.
- Robin Brooks on X: “Yesterday should have seen the Dollar rise and gold fall. Bessent reiterated strong Dollar policy and the Fed was upbeat about the US. But USD was flat and gold is up 7% in the past 24 hours. The Dollar feels heavy and the debasement trade is unstoppable. robinjbrooks.substack.com/p/the-dollar-f”
- The Market Ear on X: "CTA trend positioning is stretched across assets.”
- The BBDXY Average True Range for the last 10 Trading days: 754 Points
Fig 1: BBDXY Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
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CHINA DATA: Activity Returns To Growth, Export Orders Continue Contracting
The official China PMIs for December showed an improvement in activity with both manufacturing and non-manufacturing returning to growth. The composite PMI rose to 50.7 from 49.7, which had been the first move below the breakeven 50-level since December 2022.
- The manufacturing PMI improved to 50.1 up from 49.2 and higher than expected. While one month doesn’t make a trend, December may signal the end of the contraction in activity in the sector that began in April. Confidence in the outlook picked up to 55.5 from 53.1.
- The recovery was driven by higher output but also new orders which returned to positive territory at 50.8. Orders growth was driven by the domestic economy with export orders continuing to contract but at a slower pace than most of the year.
- The outcome was confirmed by the RatingDog December manufacturing PMI at 50.1 up from 49.9.
- Non-manufacturing also shifted slightly into growth territory at 50.2 from 49.5, which was also stronger than consensus. Most components continued to contract though but at a slower pace than last month but expectations were very positive at 56.5. New orders remained weak at 47.3 but up from 45.7, while export orders deteriorated to 47.5 from 47.9.
- Manufacturing and non-manufacturing selling prices continued to decline in December despite positive input cost inflation. This signals that China’s inflation rate is likely to remain close to zero.
MNI: CHINA DEC RATINGDOG MANUFACTURING PMI 50.1 VS 49.9 IN NOV
- CHINA DEC RATINGDOG MANUFACTURING PMI 50.1 VS 49.9 IN NOV
MNI: **CHINA DEC MANUFACTURING PMI 50.1 VS 49.2 IN NOV
- **CHINA DEC MANUFACTURING PMI 50.1 VS 49.2 IN NOV
