The US dollar is recovering slightly as markets focus on Nvidia’s earnings

• The US dollar is trading steady ahead of a quiet US economic calendar.
• Markets appear to be risk-off ahead of Nvidia’s earnings, benefiting the dollar and weighing on Chinese tech stocks and cryptocurrencies.
• The US dollar index is up slightly, trading just below 101.00 for the second day in a row.

The U.S. dollar (USD) was mixed again on Wednesday, with markets a bit jittery ahead of Nvidia Corp.’s earnings. (NVDA) to be published after the US closing bell. Seeing the recent slowdown in some economic numbers and with the boom around Artificial Intelligence (AI) easing a touch, traders are wondering if Nvidia can maintain its growth rate and its streak of beating earnings. A miss to estimates could trigger some stronger risk-off moves, a scenario that would put the US dollar back in the good graces of traders with safe-haven flows underway.

On the US economic calendar front, almost no data points for markets to digest on Wednesday. This adds to more tension and expectations for Nvidia’s earnings. Even Federal Reserve officials are not expected to make an appearance earlier, with only Atlanta Federal Reserve Bank President Raphael Bostic scheduled to speak at 22:00 GMT.

Daily Market Reasons: Another day off

• At 11:00 GMT, the Mortgage Bankers Association released its weekly index of mortgage applications, this time for the week ending 23 August. A week earlier, the index was down a steep 10.1%, with the most recent reading at 0.5%.
• The US Treasury is auctioning off a 5-year note at around 17:00 GMT.
• Federal Reserve Bank of Atlanta President Raphael Bostic participates in a moderated conversation and Q&A on the US economic outlook at the Stanford Club of Georgia at 22:00 GMT.
• Asian shares fell as Chinese tech stocks fell ahead of Nvidia’s earnings on Wednesday. Both European and US indices are quite flat.
• The CME Fedwatch tool shows a 63.5% chance of a 25 basis point (bps) interest rate cut by the Fed in September, compared to a 36.5% chance of a 50 basis point cut. Another 25 bps cut (if September is a 25 bps cut) is expected in November by 42.5%, while there is a 45.4% chance that rates will be 75 bps (25 bps + 50 bps ) below current levels and a 12.1% probability of rates being 100 (25 bps + 75 bps) basis points lower.
• The benchmark US 10-year yield is trading at 3.82%, fairly steady for the second day in a row.

US Dollar Index Technical Analysis: Nvidia moves forex

The US Dollar Index (DXY) sees a very strange leader dictating direction. The hypothesis is very easy: If Nvidia’s earnings beat expectations again, a new wave of risk flows will likely push the stock higher and the US dollar lower. If earnings fall in line with or below expectations, the US dollar is expected to rally and risk-off flows would send stocks south.

For a recovery, DXY has a long way to go. First, 101.90 is the level to claim. A steep 2% rally would be needed to bring the index to 103.18 from the current 101.00. A very high resistance level near 104.00 not only holds key technical value, but also carries the 200-day simple moving average (SMA) as the second heavyweight limiting price action.

On the downside, 100.62 (December 28 low) is trying to hold support, although it looks quite weak. Should it break, the July 14, 2023 low at 99.58 will be the ultimate level to watch. Once this level breaks, early 2023 levels approach 97.73.

US Dollar Index: Daily Chart