US Dollar Steady As Traders Await Inflation Data, Fed Rate Decision

The US Dollar (USD) is in wait-and-see mode at the start of this week with traders gearing up for what will be an eventful week after the lackluster performance last week. The biggest highlights to have in mind for this week are the US Consumer Price Index (CPI) numbers on Tuesday, Industrial Production on Thursday, and the Michigan Consumer Sentiment survey on Friday. As if that is not enough, traders will have the opportunity to dissect the latest stance of the US Federal Reserve (Fed) with its June interest rate decision, including the press conference from Fed chairman Jerome Powell, on Wednesday. 

For this Monday, the Dollar Index (DXY) is making a small recovery after its slide lower at the end of last week, dipping below 103.25. In the Asia-Pacific session, traders revalued the US Dollar back above 103.50 as Monday already holds an important event, the auction of 3-year and 10-year Treasury notes. The Federal Budget Balance for May will be printed as well on Monday. 

Daily Digest: US Dollar To Be Mostly Data-Driven This Week

  • Not many comments are expected in the run-up to the Fed Interest Rate Decision on Wednesday as the Fed speakers are in their blackout period. 
  • Sentiment during the Asian session showed some mild appetite for risk, with Japan’s Topix Index up 0.60% near its closing bell. European indices are taking over the positive tone with the German DAX up 0.50% in early trading, at the time of writing. 
  • US equity futures had a positive close for the week on Friday and several indices have been breaking out of the bearish patterns, underlining the positive sentiment in the aftermath of the US debt ceiling agreement. 
  • The CME Group FedWatch Tool shows that markets are pricing in a 30% chance of a rate hike for June and an 85% chance for a hike in July. The pause this week could trigger some further easing in the DXY. 
  • The benchmark 10-year US Treasury bond yield trades at 3.75%. A touch lower since the US Initial Jobless Claims showed an uptick, coming out at 261,000 against 233,000 previously. The numbers account for the second-highest print for this year. 

US Dollar Index Technical Analysis: USD Bears Have Some Room To Move

The US Dollar Index (DXY) has been on a tear the past two weeks and nearly touched 105.00 to the upside at the end of May. Since then, the DXY has refrained from making new highs and is showing a bearish pattern with lower highs and lower lows. Support in the form of the 100-day Simple Moving Average (SMA), near 103.00, is expected to be tested soon for support 

On the upside, 105.47 (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 105.00 (psychological, static level), and acts as an intermediary element to cross the open space.

On the downside, 103.00 (100-day SMA) aligns as the first support level to confirm a change of trend. In the case that breaks down, watch how the DXY reacts at the 55-day SMA at 102.53 to assess any further downturn or upturn. 

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