After a slow start to the new week owing to the Memorial Day weekend in the United States (US). The US Dollar (USD) maintains its strength. The US Dollar Index (DXY), which measures the performance of the US dollar against a basket of six major currencies, remains above 104.00. After gaining 1% last week.
Following the publication of the most recent encouraging macroeconomic statistics from the United States. Investors evaluate the Fed’s policy stance and now anticipate a greater likelihood of the US central bank hiking the main interest rate one more time in June. As a result of increased US Treasury bond rates, the USD remains in demand.
Market players will be watching the ISM Manufacturing PMI, ADP Employment Change. And the US Bureau of Labor Statistics’ May employment data attentively in the second half of the week.
US dollar profits from hawkish Fed wagers.
The US Bureau of Economic Analysis (BEA) stated on Friday. That annual inflation in the United States increased to 4.4% in April from 4.2% in March. As measured by the change in the Personal Consumption Expenditures (PCE) Price Index.
The annual Core PCE Price Index, the Fed’s preferred measure of inflation, increased to 4.6%, slightly higher than the market’s forecast of 4.6%.
Additional information about According to the BEA’s release, Personal Income gained 0.4% month on month, while Personal Spending jumped 0.8%.
On Friday, Cleveland Fed President Loretta Mester told CNBC that the PCE Price Index figures highlight the moderate pace of inflation. “It’s critical for the Fed not to tighten monetary policy too much,” Mester noted.
Markets are presently pricing in a less than 40% chance that the Fed will leave its policy rate steady at the forthcoming meeting, according to the CME Group FedWatch Tool.
US President Joe Biden and Republican House Speaker Kevin McCarthy reached an agreement on Sunday to temporarily suspend the debt ceiling in order to prevent a US financial default. The agreement, which suspends the $31.4 trillion debt, still has to be approved by the House and Senate. In the next days, the debt ceiling will be raised until January 1, 2025.
The bond and stock markets in the United States will be closed on Monday. The Conference Board will issue the Consumer Confidence Index statistics for May on Tuesday.
Technical analysis of the US Dollar Index.
On the daily chart, the Relative Strength Index (RSI) indicator remains near 70, indicating that the US Dollar Index (DXY) may become technically overbought in the short future.
If DXY has a technical correction, 104.00 (Fibonacci 23.6% retracement of the November-February decline) will serve as critical support.
A daily closure below that level may attract USD sellers, allowing for a longer-term decline towards 103.00, the 100-day Simple Moving Average (SMA).
If DXY continues to employ Buyers are expected to remain interested with 104.00 as support. Furthermore, the bullish cross shown in the 20-day and 50-day SMAs indicates a buildup of momentum.
On the upside, 105.00 (psychological level, static level) stands in the way of 105.60 (200-day SMA, Fibonacci 38.2% retracement).
