- The US Dollar has a change of heart and turns red this Wednesday.
- A very light economic calendar is ahead for Wednesday.
- The US Dollar Index retreats further below 103.00 while Risk Off sweps the equity markets.
The US Dollar (USD) is facing downward pressure as the dust settles over the US Consumer Price Index (CPI) data, which came in slightly higher than anticipated. This outcome has raised uncertainties regarding the timing of potential interest-rate cuts by the Federal Reserve (Fed). Despite an initial uptick following the CPI release, the Greenback relinquished a portion of its gains on Tuesday as US equities surged. As Wednesday progresses, the DXY US Dollar Index remains resilient and appears poised to conclude above the 103.00 mark barring any unforeseen setbacks during the US trading session.
In terms of economic data, the calendar is relatively light, with no notable releases on the horizon. However, it’s worth mentioning the political landscape as both current US President Joe Biden and former US President Donald Trump secured enough votes in the Primaries on Tuesday to secure their presidential nominations. As a result, November 5 is anticipated to witness a rematch from four years ago.
Daily digest market movers: A down day
- Industrial Production figures from Europe continue to deteriorate, with Germany once again emerging as the region’s weakest performer.
- Russian President Vladimir Putin has confirmed plans to deploy troops along the Finnish-Russian border once Finland joins NATO.
- Both current US President Joe Biden and former President Donald Trump secured enough votes in Tuesday’s primaries to secure their respective party nominations, setting the stage for the November 5 Presidential election.
- Austrian Central Bank Governor Robert Holzmann warned that if the European Central Bank (ECB) were to cut interest rates before the Fed, it could lead to significant risks of an over-devalued Euro, potentially reigniting inflationary pressures.
- The weekly Mortgage Applications report, released at 11:00 GMT, showed a 7.1% increase, compared to the 9.7% jump from the previous week.
- At 17:00 GMT, the US Treasury is scheduled to conduct a 30-year Bond Auction.
- US equities are experiencing a decline, with the Nasdaq down nearly 1%, dragging both the Dow Jones and the S&P500 lower.
- According to the CME Group’s FedWatch Tool, expectations for a Fed pause in the March 20 meeting are at 99%, with only a 1% chance of a rate cut.
- The yield on the benchmark 10-year US Treasury Note is trading around 4.18%, reflecting a broad increase for the week.
US Dollar Index Technical Analysis: Risk of more downturn
Although the US Dollar Index (DXY) appears poised to record its third consecutive day of gains this week, traders are less than enthusiastic about the move given the limited impact of the CPI print on the DXY. Despite attempting to push beyond the 55-day Simple Moving Average (SMA), the DXY faced firm rejection, raising questions about what could potentially drive a sustained rally for the US Dollar amidst ongoing economic indicators showing signs of moderation.
To the upside, reclaiming ground would involve challenging the 55-day SMA at 103.34, followed by the 200-day SMA near 103.71. Subsequently, the 100-day SMA presents another hurdle at 103.72, forming a potential double resistance zone. Breaking through these levels would set the stage for a test of the key resistance level at 104.96.
However, following the CPI release, the DXY failed to even approach the 55-day SMA, suggesting further downside pressure. The next significant support lies around 102.00, a level of pivotal importance. Beyond that, the path is open for a potential decline towards 100.61, representing the low of 2023.
