The US dollar resumed growth amid expectations of another rate hike in June. It also climbed amid cautious optimism expressed by Joe Biden and Kevin McCarthy after yesterday's meeting.

The US dollar is trading just below the two-month high reached last Friday. Another bullish factor was an increase in 10-year Treasury notes. Yesterday, they logged the longest winning streak since April 2022.

Concerns over default limited the upward potential of the greenback in the narrow range of 103.1–103.40. In the Asian session, the US dollar index consolidated at 103.3 versus its main rivals.

After a strong recovery on Monday, the US dollar was hesitant to pick up a trajectory. It is still trading above the key level of 103. The next target level is the monthly high of 103.6. It also acts as resistance.

The support level is seen at 102.5. The further trajectory of the US dollar will mainly depend on incoming data this week.

The yen was unable to take advantage of strong domestic macro stats. The Manufacturing PMI Index in Japan surged to an 8-month high.

In May, the indicator reached 50.8%, returning to expansion for the first time since June last year. Moreover, it grew at the fastest pace in 13 months.

At the same time, the Composite PMI index rose at the fastest pace since October 2013. In May, it came out at 54.9%. Business activity grew in both the services and manufacturing sectors. The manufacturing sector climbed for the first time since the end of 2022.

Despite positive macro stats, the yen largely reacts to external factors. For example, on Tuesday morning, it weakened amid rising yields on US Treasury bonds.

Concerns over the default may support the Japanese currency versus the US dollar. In the Asian session, the yen managed to gain momentum amid favorable fundamental conditions.

The dollar/yen pair reached 138.5. However, a decline in the price corridor of 138.3–138.9 is likely to be limited.

The US will unveil data on PMI indices later. If they turn out to be strong, it might push government bond yields even higher. It will definitely have a negative impact on the yen.

In contrast, the growing threat of default spurs demand for the safe-haven yen. The standoff on the debt ceiling could help the yen rise higher.

The Australian dollar retained a downward movement in the morning. After a sluggish start of the week, the aussie was moving in the bearish channel of 0.6621–0.6664. It sank because of several factors.

First and foremost, its trajectory was affected by risk aversion and the rising US dollar. Oil prices fell. Tensions between the West and China are also growing. Given Australia's dependence on the Chinese market, such a situation is extremely unfavorable. As a result, it was unable to rebound.

Expectations of another rate hike by the Fed and the RBA’s dovish decision also pushed the Australian currency down. The AUD/USD pair fell to 0.6633 at the end of the Asian session on Tuesday. The aussie is likely to slide to the monthly support level of 0.6610.

After several days of moderate growth, the New Zealand dollar tumbled to 0.6626. At the end of the Asian session, it was trading in a narrow range of 0.6253–0.6304. Since last week, investors have been assessing the prospects of a rate hike by the Reserve Bank of New Zealand.

The regulator is likely to raise the interest rate for the 12th time in a row at its meeting tomorrow. However, traders priced in the likelihood of a rate hike a long time ago. Therefore, the trajectory of the kiwi will largely depend on the US dollar’s movements.

00:00 Intro
00:23 Market concerns
01:28 US Fed
02:16 USDX
03:33 JAPAN MANUFACTURING PMI INDEX
03:58 COMPOSITE PMI INDEX
04:21 USD/JPY
05:29 AUD/USD
06:36 NZD/USD

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