FX Daily Strategy: Asia, Jul 24

We expect gains in July’s S and P PMIs, more significantly in manufacturing, to 55.5 from 53.9, with a more moderate increase in services to 51.5 from 51.2.A strong gain in the July Philly Fed manufacturing index and a more moderate one in the Empire State’s suggest improvement in manufacturing. An index of 55.5, while up from June’s 53.9, would still be below June’s preliminary index of 55.7.

Manufacturing is being fueled by AI but services remain quite subdued. However a modest rise would continue a modest recovery from a March dip below neutral, assisted by gasoline prices moving off their peak.

We expect a June new home sales total of 615k, which would be an increase of 6.0% if May’s 7.3% decline to 580k sees no revisions. This would still sustain step down in trend in 2026 to date, with movements in the preceding two years outside a 650-700k range having tended to be brief. Housing sector indicators have generally had little clear trend, though there has been some softening recently, with the NAHB homebuilders’ index slipping in both June and July, with inflation concerns putting upward pressure on mortgage rates.

We expect sales to increase in the West and South after May dips but slippage in the Northeast and Midwest which increased in May. The West has the most upside scope but the South is the largest region. We expect slippage in prices after gains in May, the median by 2.0% on the month and the average by 3.0%. This would leave the median up 1.8% yr/yr after a flat May and the average up 3.1% yr/yr versus 5.0% in May.

However, these U.S. data may not be the key driver for DXY. Geopolitics remain the sole determinant of where the greenback will go. Haven bids have been strong on escalation tension between the U.S. and Iran. With both sides playing hardball, it maybe difficult for a near term resolution soon.

On the chart, cautious trade has given way to a test of support at 101.00, where fresh buying interest is prompting fresh consolidation. Intraday studies are under pressure, highlighting room for a retest beneath here. But rising daily readings should limit any break in renewed buying interest/consolidation above 100.75. In the coming sessions, cautious trade is expected to give way to fresh tests higher, with focus to turn to the 101.33 weekly high of 13 July. But mixed/negative weekly charts should limit any immediate extension beyond here in consolidation within the 101.50 - 101.80 strong barrier. Meanwhile, a close below 100.75 would add weight to sentiment and open up a deeper retracement towards the 100.35 weekly low of 15 July.