- The DXY Index trades bearishly at 103.7, marking a weak end to the week.
- US ISM Manufacturing PMI came disappointingly lower at 47.8, far off the anticipated 49.5.
- The expectations for the easing cycle to start in June remain intact.
Commencing the new month of trading on Friday, the US Dollar Index (DXY) experiences a marginal dip in its opening, settling at the 103.7 level. This descent is primarily attributed to a contraction witnessed in the US manufacturing sector during February. Despite the evident downturn in manufacturing performance, Federal Reserve (Fed) officials remain stoic, maintaining their stance against initiating rate cuts.
Simultaneously, as the US economy presents a mixed picture, market sentiments align with the Fed’s projections. Anticipation in the markets now centers around an expected 75 basis points of easing in 2024, set to commence in June.
Daily digest market movers: US Dollar weakens as ISM PMIs display signs of softness in US economic activity
According to data released by the Institute for Supply Manufacturing (ISM), February’s figures indicate a notable weakness. The Manufacturing PMI witnessed a decline from 49.1 in January to 47.8, falling significantly short of the market’s anticipated 49.5.
In terms of specifics, Manufacturing Prices dipped to 52.5 compared to the previous 52.9, and the Employment Index saw a decrease from 47.1 to 45.9. Additionally, the New Orders Index retreated from 52.5 to 49.2.
Looking ahead to the upcoming Federal Reserve (Fed) meetings, market expectations point towards a status quo at the March meeting, with low odds of a cut in May. However, as we approach the June meeting, the probabilities of a cut rise to 50%, as indicated by the CME FedWatch Tool.
Technical analysis: DXY bulls fail to hold the line and retreat below the 100-day SMA
The daily chart signals a mixed outlook for the index. Despite the Relative Strength Index (RSI) residing in positive territory, its downward slope suggests a waning buying momentum, hinting at a potential shift in market sentiment. Nonetheless, the RSI stays in the positive range, implying that although buying strength is diminishing, it still holds.
Meanwhile, the stagnant red bars on the Moving Average Convergence Divergence (MACD) depict a momentary pause in the trend, reflecting an undecided market.
Examining the Simple Moving Averages (SMAs), the index trades below the 20 and 100-day SMAs, indicating short-term selling pressure. However, its position above the 200-day SMA suggests that the longer-term uptrend persists. This reveals that, in the broader perspective, bulls are successfully maintaining their position against bearish pressures.
