US dollar (DXY) is battling to recover despite conflicting PCE data and expectations of Fed cuts.

On Friday, the US Dollar, as represented by the DXY, showed some resilience amid daily losses following the release of mixed Personal Consumption Expenditures (PCE) data. Despite the fact that expectations have dropped, the market remains concerned about the possibility of a Federal Reserve (Fed) rate cut in September.

The possibility of a Fed rate drop in September persists, but toned down.

Signs of disinflation in the US economy have begun to emerge, raising expectations for a rate decrease in September. Yet, Federal Reserve policymakers remain cautious and data-dependent, so next week’s meeting will be critical to the short-term market dynamics.

Daily Market movers: US Dollar on fragile ground due to mixed PCE data.

The annual core PCE, excluding volatile food and energy items, increased steadily by 2.6%, defying economists’ predictions of a 2.5% slowdown.
The monthly core PCE inflation rate, the Fed’s preferred inflation metric, exceeded the previous and projected figures of 0.1% to reach 0.2%.
Though this higher growth rate considered steady, it falls short of reducing predictions that the Federal Reserve will lower interest rates by the September meeting, with two cuts expected this year.

All eyes now focused on next week’s FOMC decision.

Next week’s Federal Open Market Committee (FOMC) will offer markets with new information on the bank’s
The DXY technical picture remains bearish, despite the index trading sideways.
Even though the DXY Index is struggling to retain the 200-day Simple Moving Average (SMA), bearish indications persist. The direction of the index now depends largely on whether the DXY can maintain the mentioned SMA, but it is likely that the index will trade sideways in the coming sessions as indicators such as the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) remain in the negative zone but have flattened.

Supports are seen at 104.15 and 104.00, while resistance is seen at 104.30 and 104.50.