- The trajectory of the easing cycle remains contingent on incoming data, with June being eyed as a possible initiation point.
- Despite the escalation in US CPI figures, investor sentiment is leaning more towards concerns regarding the weakness in labor market indicators.
- The pace of the USD for the remainder of the week will largely be dictated by the outcomes of Retail Sales and the weekly Jobless Claims figures.
The US Dollar Index (DXY) is currently at 102.80, showing marginal declines. Despite the robust figures from the recent Consumer Price Index (CPI) report, investor sentiments regarding the onset of interest rate cuts by the Federal Reserve (Fed) have remained largely unchanged. With concerns lingering over the sluggish labor market, investors are eagerly awaiting the upcoming Retail Sales data for further insights into the state of the US economy.
Given the observed weaknesses in the US labor market, investors are likely to closely monitor the evolution of Unemployment figures to gauge the timing of potential rate cuts. Moreover, any signs of economic slowdown in the US could divert attention from the uptick in inflation witnessed in February.
Daily digest market movers: DXY trades evenly in anticipation of additional US data
- The February US Consumer Price Index (CPI) data revealed an unexpected uptick in inflation. The year-over-year increase in the headline CPI reached 3.2%, surpassing the previous reading of 3.1%, while the core CPI surged by 3.8% annually, contrasting with January’s figure of 3.7%.
- Looking ahead, Thursday’s US economic reports will include the Producer Price Index (PPI), which is anticipated to show a year-over-year increase of 1.2%, down from 1.9% in January. Additionally, market participants will closely monitor Retail Sales data and weekly Initial Jobless Claims.
- In the upcoming Federal Reserve meeting in March, it is widely expected that the Fed will maintain current interest rates, with only a 15% probability of a rate reduction in May and a slightly higher likelihood of 75% in June. However, a hawkish shift in the forthcoming March Dot Plot could alter these forecasts.
- US Treasury bond yields are on the rise, with the 2-year yield at 4.61%, the 5-year at 4.17%, and the 10-year at 4.18%.
DXY technical analysis: DXY bears resume their path, bearish SMA crossover spotted at 103.70
Based on the technical analysis of the daily chart, the current market sentiment appears to be predominantly bearish. The Relative Strength Index (RSI), although stabilized, remains in negative territory, indicating a prevailing bearish stance. However, there are signs that selling pressure has eased temporarily as bears take a pause.
The Moving Average Convergence Divergence (MACD) indicator is also exhibiting a flat trend with red bars, suggesting ongoing bearish momentum but hinting at a potential slowdown in selling pressure following a 1% pullback observed last week.
Furthermore, the index is trading below key levels such as the 20, 100, and 200-day Simple Moving Averages (SMAs), reinforcing the bearish sentiment in the market. Additionally, the recent bearish crossover of the 20-day SMA below the 100 and 200-day averages around 103.70 further supports the negative outlook for the USD.
