The U.S. dollar index (DXY) took a 1.44% nosedive to an intraday low of 95.926 on Wednesday after the People’s Bank of China (PBoC) devalued the yuan against the U.S. dollar for the second day. The China renminbi (CNY), or Mainland yuan, traded against the U.S. dollar as low as 6.4474 yuan per dollar on Wednesday, down 1.96% from the previous close. On Tuesday, the PBoC pegged the yuan to the U.S. dollar at a new daily reference rate of 6.2298 yuan per dollar, compared to 6.1162 on Monday, and lets it trade as much as 2% on either side of what is known as the parity rate. 

According to the U.S. Census Bureau, the U.S. exported goods and services of about $55.9 billion to China so far this year until the end of June, while imports were as much as $226.7 billion, resulting in a trade deficit with China of $170.8 billion. The deficit is expected to widen, resulting from the recent yuan devaluation by the PBoC, meaning a weaker dollar is ahead.

The weakening dollar could be attributed to the U.S. Job Openings and Labor Turnover Survey (JOLTS) report, released by the Department of Labor on Wednesday, saying that the number of job openings rose to 5.25 million on the last business day of June, down 100,000 from the revised 5.35 million in May, missing economists’ forecast of 5.35 million job openings. 

The quits rate, which measures workers who voluntarily resign, held steady at 1.9%, meaning workers aren’t quitting their old job for a new one despite that job openings are at a near record level. The Federal Reserve likes this report because it helps confirm the trend in jobs.

The 2-Year Treasury Note yield, which has been stuck under 0.75% since the beginning of the year, ticked down to as low as 0.621% on Wednesday as the Federal Reserve may be losing control of the short-end of the bond market. A decline in the short-term borrowing rate, such as the 2-Year Treasury Note, could signal that a rate hike may not be happening anytime soon.

Technically, the U.S. dollar index has been moving in a bearish ascending wedge pattern since mid-June. The DXY was unable to break out the trendline head resistance at about the 98 level, twice since mid-July. The index broke down the ascending wedge chart pattern and retested 96.27, or the 50% Fibonacci retracement level. The projected target for the ascending wedge breakdown is 94.20. If the U.S. dollar index falls below the 96.27 level, the near-term support is 95.

The headline risks for the U.S. dollar index this week are the U.S. retail sales due on Thursday, and the eurozone April-June GDP due on Friday.