- The Greenback gears up to hold onto a 0.7% weekly gain.
- Sentiment data from the University of Michigan came in weak.
- On the bright side, Industrial Production data came in stronger than expected.
- The focus will now turn to next week’s FOMC meeting.
On Friday, the US Dollar Index (DXY) is showing slight gains, reaching the level of 103.40, as it rebounds from December lows amidst the uptick in US Treasury yields. This resurgence comes in the wake of robust inflation data released earlier this week. The US Dollar’s resilience, buoyed by strong economic indicators and the Federal Reserve’s (Fed) cautious approach toward swift monetary easing, suggests the potential for further recovery.
Attention will be squarely focused on the updated Federal Open Market Committee (FOMC) forecast next week, which could provide additional momentum for the US Dollar. Despite persistent inflationary pressures in the US, the timing of the anticipated easing cycle, slated for June, remains subject to incoming economic data. Investors, while acknowledging elevated inflation rates, are also weighing mixed signals from the labor market, which have somewhat tempered concerns. The forthcoming FOMC Dot Plot release is poised to offer further insights and could potentially recalibrate market expectations regarding the timing and extent of monetary policy adjustments.
Daily digest market movers: US Dollar to close the week with mild gains after mid-tier data
- The University of Michigan released its March Consumer Expectations index, showing a slight decline to 74.6 from the previous figure of 75.2. Similarly, the Consumer Sentiment index for March was reported at 76.5, down slightly from 76.9 in the previous period. However, the 5-Year Inflation Expectations remained steady at 2.9%.
- On a positive note, Industrial Production (MoM) for February improved to 0.1%, rebounding from the previous report of -0.5%. Meanwhile, US Treasury yields saw an increase, with the 2-year yield at 4.71%, the 5-year at 4.13%, and the 10-year at 4.29%.
- Market sentiment suggests no anticipated rate cuts from the Federal Reserve in the upcoming week, with attention focused on whether the Fed can navigate a smooth economic transition. Expectations for a rate cut in May stand at 10%, while the probability of a cut in June is estimated to be around 65%. Additionally, investors will closely monitor whether officials still maintain their outlook for three cuts in 2024
DXY technical analysis: DXY sees a bearish undertone despite the recent bullish gains
The daily chart indicators depict a prevailing selling momentum within DXY’s technical framework. Despite a positive slope, the Relative Strength Index (RSI) remains in negative territory, indicating that bears maintain control while buyers are gradually gaining momentum. Similarly, the Moving Average Convergence Divergence (MACD) histograms show diminishing red bars, suggesting a decrease in selling pressure.
Furthermore, DXY is currently trading below its 20, 100, and 200-day Simple Moving Averages (SMAs), signaling a robust downtrend. This positioning below the SMAs implies a short-term bearish outlook, which could thwart any bullish attempts. Despite the gradual progress made by bulls, the prevailing selling pressure indicates significant downward momentum. The bearish perspective is expected to persist until the RSI enters bullish territory and the MACD bars transition to the green zone.
