US Dollar Sideways As Traders Are Preparing For PCE Inflation, Durable Goods Data

The US Dollar (USD) is going nowhere on Friday as traders hear similar signals out of Washington on the debt ceiling debate, and a slew of US data is set to hit the wires this Friday. The US debt ceiling keeps making headlines, with more details being released about a possible deal, although an agreement this week looks almost close to impossible. US President Joe Biden gave more information on Thursday night about the talks and reiterated that there would be no default on his watch. 

On the macroeconomic data front, a big batch of essential data is about to hit the markets. At 12:30 GMT, the Fed’s preferred inflation metric is being published – the Personal Consumption Expenditure (PCE) inflation numbers, both core and overall, for monthly and yearly performances. These numbers have the potential to shift market expectations for the next Federal Reserve interest rate decision in June and July, thus being a vital market-mover for US Dollar traders. 

Personal Spending, Income figures, Durable Goods Orders, and Inventory data will hit the wires simultaneously. To close off the batch of macroeconomic data for the US, the University of Michigan is set to issue its May Final reading for Consumer Sentiment and Inflation Expectations. These numbers could help round-up moves on US Dollar, Treasury yields, and other assets. 

Daily digest: US Dollar on the outlook for some data guidance

  • US equity futures are mildly green after a subdued start this Friday, while the Chinese Hang Seng Index closed nearly 2% lower and still sees Europe looking for direction. 
  • The CME Group FedWatch Tool shows that markets are pricing in a 73% chance of a rate hike for July, and even June is now at a 33% chance for a walk. A significant shift is also being noticed for the September expectations: A  rate cut expectation has been turned into a 52% possibility of a rate hike. The data coming out this Friday could lock in that rate hike for July and see a more than 50% chance for June and September rate hikes. 
  • US President Joe Biden commented after the last debt-ceiling meeting that a proposal for a two-year spending freeze is on the table and reiterated there would be no default. Meanwhile, GOP debt negotiators gave ground on defense spending demands. 
  • Negotiator Garret Graves said that finding a debt-limit deal this Friday will be hard. 
  • US Credit Default Swaps (CDS) eases a touch to 163.875 after peaking at 165.83 on Thursday. The peak was last week on Monday at 177.62 when default concerns were at their highest. 
  • Fitch places Fannie Mae and Freddie Mac ratings on watch. 
  • US Treasury Cash balance dropped to $49.5 billion on Wednesday. 
  • The benchmark 10-year US Treasury bond yield trades at 3.79% and is holding at that level after briefly hitting 3.82%, awaiting further guidance from the data later this Friday. 

US Dollar Index technical analysis: USD to peak above or to pair back below 104

The US Dollar Index (DXY) has taken out the 55-day and the 100-day Simple Moving Averages (SMA), respectively, at 102.43 and 102.85 on the upside. The US Dollar safe-haven status keeps seeing bids for the DXY, with 104 broken early on Thursday and now eases a touch as a debt-ceiling deal takes shape. 

On the upside, 105.73 (200-day SMA) still acts as a long-term price target to hit, as the next upside key level for the US Dollar Index is at 104.00 (psychological, static level), and acts as an intermediary element to cross the open space.

On the downside, 102.85 (100-day SMA) aligns as the first support level to confirm a trend change. If that breaks down, watch how the DXY reacts at the 55-day SMA at 102.48 to assess any further downturn or upturn. 

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