- The DXY Index holds steady at 104.12, rebounding from earlier losses.
- Investors are closely watching Wednesday’s release of US CPI figures for March, which will heavily influence market sentiment regarding the Fed’s next moves.
Currently trading at 104.12, the US Dollar Index (DXY) remains relatively neutral. Market activity is subdued, with attention primarily focused on the upcoming release of March’s US Consumer Price Index (CPI) figures scheduled for Wednesday. Meanwhile, the US Dollar is under pressure from declining Treasury yields, while minor data releases have failed to elicit significant market reactions.
The forthcoming CPI data is expected to further shape expectations regarding the Federal Reserve’s monetary policy, with June emerging as a potential starting point for easing measures. Despite the Fed revising its projections upward amid two consecutive months of elevated inflation, Jerome Powell has maintained a cautious stance. Consequently, the US Dollar remains uncertain, awaiting potential shifts in policy direction based on incoming economic data. Should inflation exceed expectations, last week’s robust labor market data might signal a more hawkish stance from the Fed.
Daily digest market movers: DXY remains neutral ahead of CPI data, minor reports didn’t trigger movements
- The National Federation of Independent Business (NFIB) has reported a decrease in small business optimism, attributed largely to concerns over inflation and the labor market. Despite a robust March jobs report, there are indications that continued austerity in monetary policies could potentially lead to an increase in unemployment rates.
- Federal Reserve (Fed) officials appear to have moderated their previously hawkish stance, suggesting a shift towards a potentially dovish or neutral monetary policy. Market sentiments reflect reduced expectations of a rate cut, with the likelihood of a cut in June dropping to nearly 50%, and in July falling below 90%. These rates represent the lowest probabilities since last October.
- US Treasury yields are experiencing a decline, with the 2-year yield dropping to 4.74%, and yields for the 5-year and 10-year tenures trading at 4.37% and 4.36% respectively.
- The upcoming CPI data is expected to inject volatility into the bond market and influence expectations regarding future Fed decisions. Additionally, investors will closely scrutinize the FOMC minutes from March’s meeting, which are scheduled for release on Wednesday.
DXY technical analysis: DXY demonstrates bullish tendencies despite short-term constraints
On the daily chart, the Relative Strength Index (RSI) remains static, indicating neutral momentum. However, the emergence of a new red bar in the Moving Average Convergence Divergence (MACD) histogram suggests a possible shift towards bearish momentum in the short term.
Contrastingly, the DXY is displaying bullish resilience, maintaining positions above the 20, 100, and 200-day Simple Moving Averages (SMAs). This positioning implies that buying pressure continues to prevail, with bulls defending key support levels represented by these significant SMAs.
