- Investors await US inflation data to shape their expectation of easing cycle pace.
- The consensus sees the easing cycle initiation from June after mixed NFP data on Friday.
- The US won’t release any relevant reports in Monday’s session.
In Monday’s session, the US Dollar Index (DXY) is modestly higher, currently trading at 102.80. Despite Federal Reserve Chair Jerome Powell adopting a dovish tone and the release of mixed employment figures, the upcoming stance of the Federal Reserve on interest rate adjustments is anticipated to be significantly influenced by the release of US inflation data scheduled for Tuesday.
The US labor market displayed a mixed performance in February, marked by an increase in the Unemployment Rate. Additionally, earnings figures experienced a mild decline, while the pace of job creation accelerated. Despite these mixed signals, expectations for easing monetary policy didn’t undergo significant changes, with the consensus still pointing towards the likelihood of the Fed’s first interest rate cut occurring in June.
Daily digest market movers: DXY sees some upside as markets brace for CPI
- The combination of Powell’s speech and the mixed employment data appears to be restraining any upward movement of the USD. Investors are maintaining their expectations for a potential interest rate cut by the Federal Reserve in June, with predictions indicating a cumulative easing of 100 basis points throughout the year.
- This week’s data introduces a potential imbalance in risks for the Greenback, as any signs of weakened inflation or disappointing Retail Sales figures from February could strengthen the case for a rate cut in June. Meanwhile, US Treasury bond yields are showing an upward trend, currently trading at 4.51%, 4.07%, and 4.09% for the 2-year, 5-year, and 10-year bonds, respectively.
DXY technical analysis: DXY displays a hint of bullish resurgence, bears still in charge
On the daily chart, the market sentiment appears mixed, as evidenced by the indicators. The Relative Strength Index (RSI) remains within negative territory, but its positive slope suggests a potential weakening of selling momentum, indicating a tentative shift toward a more bullish stance.
The Moving Average Convergence Divergence (MACD) is characterized by flat red bars, signaling a potential loss of selling momentum by bears and opening the door for a modest bullish correction.
Examining the Simple Moving Averages (SMAs), the DXY is positioned below the 20, 100, and 200-day SMAs, reinforcing the prevailing bearish trend. Despite this, concurrent signs of a bullish reversal cannot be entirely dismissed.
Following a 1% decline last week, the short-term outlook for the DXY remains tilted toward the bearish side. However, with indications of a potential bullish resurgence and a temporary pause in bearish momentum, buyers may seek an opportunity to regain control in the near future.
