U.S. Dollar (DXY) Rallies Amid Global Market Sell-Off

Key Insights

• The global rush to safe-haven assets provided significant support to the American currency. 
• GBP/USD is down by more than 2% as traders react to the weak economic data from the UK. 
• EUR/USD is testing new lows. 

U.S. Dollar Tests New Highs Ahead Of The Weekend

U.S. dollar is testing new highs as traders rush to safe-haven assets amid global market sell-off.

The U.S. has recently released flash PMI reports for September. Manufacturing PMI increased from 51.5 in August to 51.8 in September, compared to analyst consensus of 51.1. Services PMI grew from 43.7 to 49.2, compared to analyst consensus of 45.

The strong reports provided additional support to the U.S. dollar. The U.S. economy remains in a decent shape, so the Fed will continue to raise rates aggressively.

EUR/USD Heads Towards The 0.9700 Level

EUR/USD dropped to new lows after the release of PMI reports. Euro Area Manufacturing PMI declined from 49.6 in August to 48.5 in September, while Euro Area Services PMI decreased from 49.8 to 48.9. Numbers below 50 show contraction.

The sell-off in EUR/USD continues. Interestingly, RSI is still in the moderate territory, so there is enough room to gain additional downside momentum in case the right catalysts emerge. EUR/USD received some support near 0.9725, but it remains to be seen whether it has enough support for a rebound.

GBP/USD Tests Multi-Decade Lows

GBP/USD is falling like a rock. Today’s economic reports from the UK were disappointing. Consumer Confidence decreased from -44 in August to -49 in September. UK Manufacturing PMI increased from 47.3 to 48.5, while UK Services PMI declined from 50.9 to 49.2.

Currently, GBP/USD is trying to settle below 1.1000. Back in 1985, GBP/USD traded as low as 1.0520 but quickly rebounded towards 1.2000. The pound is clearly oversold, and it looks that the risks of a rebound are significant.

AUD/USD Remains Under Strong Pressure

Not surprisingly, commodity-related currencies have also found themselves under strong pressure. AUD/USD declined towards 0.6560 while NZD/USD tested the 0.5800 level. USD/CAD is currently trying to settle above the 1.3550 level.

Commodity markets are falling, and commodity-related currencies will likely remain under significant pressure ahead of the weekend.

USD/JPY Gets Back Above 143

USD/JPY is trying to settle back above the 143 level after the strong sell-off, which was caused by BoJ interventions.

At this point, it looks that the BoJ is ready to intervene when USD/JPY is above the 145 level. It is not clear whether the BoJ wants to push USD/JPY below 140.

While the yen will remain weak due to the dovish policy of the country’s central bank, USD/JPY bulls should be ready for more interventions near the 145 level.

For a look at all of today’s economic events, check out our economic calendar.