US Dollar (DXY) Index News: Euro Strength Weighs on Greenback

James Hyerczyk
Updated: Jul 2, 2024, 04:28 GMT+00:00

Key Points:

  • Dollar Index falls to 105.125, impacted by a stronger euro. Traders react to France's election and economic data from Japan and the U.S.
  • Euro rises to $1.0753, reaching a two-week high, as France's parliamentary election results ease aggressive fiscal policy fears, supporting European stocks and bonds.
  • Gold prices stable at $2,326.67 per ounce, with 10-year U.S. Treasury yields hitting a near three-week high. Investors await key economic data and Fed remarks.
US Dollar (DXY) Index News: Euro Strength Weighs on Greenback

In this article:

U.S. Dollar Index Declines Amid Euro Surge and Yen Weakness

The U.S. Dollar Index (DXY) fell on Monday, pressured by a stronger euro and a weakening yen. This movement came as traders digested the results of France’s parliamentary elections and reacted to economic data from Japan and the United States.

At 13:52 GMT, the U.S. Dollar Index is trading 105.626, down 0.223 or -0.21%.

Euro Gains After French Elections

The euro rose 0.4% to $1.0753, reaching a two-week high, after Marine Le Pen’s National Rally (RN) secured a significant but lower-than-expected victory in the first round of France’s parliamentary elections. The RN’s performance, though historic, was less than anticipated, easing market fears of aggressive fiscal policies. The outcome bolstered European stocks and bonds, providing support for the euro.

U.S. Inflation Data Impact on Dollar

Friday’s U.S. inflation data showed a cooling in May, which reinforced expectations that the Federal Reserve might cut interest rates later this year. The personal consumption expenditures (PCE) price index indicated the lowest annual rate increase in over three years, with core PCE rising just 0.1% monthly and 2.6% annually. Market participants are now pricing in a 63% chance of a Fed rate cut in September, up from 55% a month ago, according to the CME FedWatch tool.

U.S. Treasury Yields Influence on Gold

Gold prices remained stable on Monday, with spot gold nearly unchanged at $2,326.67 per ounce, as U.S. Treasury yields held firm. Benchmark 10-year U.S. Treasury yields hit a near three-week high, making non-yielding bullion less attractive for investors. Investors are cautious ahead of key economic data, including Fed Chair Jerome Powell’s remarks on Tuesday and nonfarm payrolls data on Friday. UBS analyst Giovanni Staunovo noted that softer payroll data could lift gold prices, potentially pushing them to $2,600 by year-end.

Upcoming Economic Data

Investors are focused on upcoming U.S. economic data, including job openings, private payrolls, and the June jobs report, which could influence expectations for Fed policy. Strong labor market data may counterbalance the recent cooling inflation, affecting the timing and magnitude of potential rate cuts.

Market Forecast

In the near term, the U.S. Dollar Index may face further downward pressure as traders anticipate dovish signals from the Federal Reserve. The euro could maintain its strength if the French elections result in a balanced government, reducing fiscal policy concerns. Conversely, the yen’s outlook remains bearish unless the BOJ signals a significant policy change.

Technical Analysis

Daily US Dollar Index (DXY)

The U.S. Dollar Index (DXY) fell 0.2% to 105.125, nearing support at 105.159, while resistance remains at 106.130. Current price action suggests potential consolidation, with the 50-day and 200-day moving averages providing further support at 105.159 and 104.499, respectively.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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