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On August 12th, a research report from CICC stated that the commodity market is likely to continue to diverge. AI data centers, grid expansion, and energy transition will continue to support demand for copper and aluminum. Given the continued strong supply constraints, non-ferrous metals offer the dual benefits of improved liquidity and AI-driven physical investment, and we recommend an overweight position. Energy commodities such as oil still possess hedging value, but future volatility may increase; we suggest maintaining current positions and avoiding chasing highs.On August 12th, a research report from CICC stated that two narratives that previously suppressed gold prices are being disproven: First, global liquidity has not truly entered a tightening cycle. With declining inflation and slowing growth in the US, economic fundamentals support a looser monetary policy. Warshs "hawkish in name but dovish in practice" stance suggests that Fed reforms may open up room for future interest rate cuts. Second, "de-dollarization" is not over. While Warshs balance sheet reduction policy objectively helps repair the dollars credibility, this policy is subject to multiple constraints from financial markets and politics, resulting in high uncertainty regarding its future implementation. Meanwhile, the structural erosion of the dollars credibility by high debt, high deficits, and policy uncertainty may be difficult to reverse. Global central banks net gold purchases rebounded to 289 tons in the second quarter, a 62% year-on-year increase and a record high for the second quarter, reflecting deep-seated concerns about the dollar among global central banks. Reserve diversification will continue to support gold demand in the medium to long term. As global liquidity becomes more relaxed, upward pressure on real interest rates and the dollar will ease, potentially allowing gold to regain the dual support of liquidity and monetary system diversification. We believe the gold bull market is not over, and the window for re-allocating after the previous correction has opened. We recommend continuing to overweight gold.Japans broad money supply liquidity rate was 4.4% year-on-year in July, down from 4.5% in the previous month.August 12th - According to a report by the Wall Street Journal on the 11th, an internal investigation by the U.S. Department of Defense revealed that a series of U.S. military strikes against Yemen in 2025 will result in hundreds of civilian casualties. The report states that this marks the first time the Trump administration has officially acknowledged the scale of civilian casualties caused by its airstrikes against the Houthi rebels in Yemen.Japans M3 money supply annual rate was 1.4% in July, down from 1.50% in the previous month.

Dollar Index: Bears Continue to Dominate Below 102.00

Alina Haynes

May 30, 2022 17:02

 截屏2022-05-30 下午4.54.16.png

 

The greenback, as measured by the US Dollar Index (DXY), continues on the defensive after Monday's recovery from lows in the 102.40-35 range.

Multi-Week Lows for the US Dollar Index

The index loses ground for the third consecutive session at the start of the week, remaining below the 102.000 level and despite a widespread preference for riskier assets among investors.

 

On Monday, no US market activity should leave the price action at the mercy of global risk appetite trends, as market participants continue to evaluate the various moves the Federal Reserve could take to normalize monetary conditions, primarily through interest rate hikes.

 

Monday's US schedule is barren, with just C. Waller (permanent voter, hawk) scheduled to speak during the NA session.

What to Search for Regarding USD

The dollar retreated to multi-week lows at the conclusion of last week due primarily to investors' tilt toward riskier assets.

 

Also weighing on the dollar was the view that inflation may have peaked in April, which supports the notion that the Fed may not need to be as active in hiking Fed Funds rates as market players anticipate.

 

In the meantime, the Fed's divergence from the majority of its G10 peers, geopolitical turbulence, rising US rates, and a potential "hard landing" of the US economy are all factors that will continue to favor a stronger dollar in the coming months.

 

House Price Index, CB Consumer Confidence (Tuesday); MBA Mortgage Applications, Final Manufacturing PMI, ISM Manufacturing, Construction Spending, Fed Beige Book (Wednesday); ADP Employment Change, Initial Claims, Factory Orders (Thursday); Nonfarm Payrolls, Unemployment Rate, Final Services PMI, ISM Non-Manufacturing (Friday); and Nonfarm Payrolls, Unemployment Rate, Final Services PMI, ISM Non-Manufacturing (Friday).

 

Back burner issues: Powell's "softish" landing... what does that mean? Increasing geopolitical tensions with Russia and China. The Fed's more aggressive path for interest rates this year and in 2023. US-China trade dispute. Future of the Build Back Better plan by Biden.

US Dollar Index Relevant Levels

Now, the index is falling 0.08 percent at 101.55 and the next support level is at 101.38 (30-day low for the month of May), followed by 101.11 (55-day simple moving average) and 99.81. (weekly low April 21). In contrast, a breach of 105.00 (13 May 2022 high) would pave the way to 105.63 (11 December 2002 high) and then 106.00. (round level).

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