U.S. Dollar Index is trading up 0.19% at 105.41

The U.S. dollar hit its lowest level since mid-June against the Japanese yen on Monday as investors weighed the likelihood that the Federal Reserve will not raise interest rates as aggressively as some had expected.

The U.S. dollar index was volatile after data showed U.S. manufacturing activity slowed less than expected in July. But a key report for investors this week will be the U.S. monthly jobs report on Friday.

“It’s the beginning of a new month, and the real focus is on the possibility that the Fed slows down its rate hikes,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.

“The big focus is on the jobs data at the end of the week, and that’s likely to confirm that the improvement in the labor market is moderating,” he said. “It’s a weak number, but only given our recent past.”

The dollar index is up roughly 10% for the year so far, boosted by investor expectations of an aggressive rate hike policy from the Fed.

“After a big move, I think we’re really consolidating,” Chandler said.

Last week, the Fed raised the benchmark overnight interest rate by three-quarters of a percentage point. The move came on top of a 75 basis points hike last month and smaller moves in May and March, in an effort by the U.S. central bank to cool inflation.

Also last week, the dollar crumbled against the yen, and two-year yields in the U.S. Treasury market also fell, after data showed the U.S. economy shrank for a second straight quarter.

On technical fronts U.S. Dollar Index RSI stood at 43.75 and currently it is trading below all MA. So, SELL position can be taken with following target and stoploss:

TRADE SIGNAL – : U.S. Dollar Index – SELL: 105.40, TARGET: 104.83, STOP LOSS : 105.93