US Dollar (DXY) Index News: Greenback Steady as Traders Eye PCE Inflation Data

James Hyerczyk
Published: May 27, 2024, 13:28 GMT+00:00

Key Points:

  • The dollar remains steady with upcoming inflation data in focus, influencing rate expectations.
  • Traders watch U.S., European, and Japanese inflation data for interest rate clues.
  • Euro and sterling trade within tight ranges; yen steady despite intervention.
US Dollar Index (DXY)

In this article:

Dollar Begins Week Steady Amid Inflation Focus

The dollar started the week on a steady note as traders kept an eye on upcoming U.S., European, and Japanese inflation data, which are expected to influence global interest rate outlooks.

In Monday’s limited trade, the U.S. Dollar Index (DXY) is trading 104.683, down 0.064 or -0.06%.

Stable Dollar Amid Interest Rate Speculations

Recent foreign exchange markets have seen a pursuit of higher-yielding currencies, which has bolstered the dollar. Meanwhile, mixed U.S. economic data has left policymakers uncertain about future rate changes. Major currency pairs, including the euro and sterling, have been trading within tight ranges. The euro, after gaining 0.9% against the dollar last week, remained stable at $1.0846. This trading week began quietly due to holidays in the U.K. and U.S.

Key Inflation Data in Europe

Traders are closely watching German inflation data, set for release on Wednesday, and eurozone readings on Friday for signs of a potential European Central Bank rate cut. Sterling is testing a year-high at $1.2735, while the Australian and New Zealand dollars have retreated, with the Aussie at $0.6626 and the kiwi at $0.6122, as markets reassess U.S. interest rate cut expectations.

U.S. Inflation and Consumer Sentiment

The core personal consumption expenditures price index (PCE), a key Fed inflation gauge, is expected to show a steady month-on-month reading on Friday. A significant deviation from expectations could impact currency markets. The dollar saw fluctuations last week, initially falling due to lower consumer price rises and disappointing retail sales, but later strengthened on robust PMI data.

Yen and Swiss Franc Performance

The yen has been relatively stable at 156.87 to the dollar but remains weak despite rising Japanese government bond yields, which are still significantly lower than U.S. yields. Tokyo CPI data, due Friday, will provide further insights into Japan’s inflation trends. Meanwhile, the Swiss franc continues to weaken, hitting 0.9928 per euro, its lowest since April 2023.

Market Forecast

Given the upcoming key inflation data and the recent strength of the U.S. PMI, the dollar is expected to maintain its current levels. However, any significant surprises in the core PCE index or European inflation data could lead to increased volatility. Traders should remain cautious and watch for data releases that could shift the interest rate outlook.

Technical Analysis

Daily US Dollar Index (DXY)

The index remains trapped between long-term support and intermediate-term resistance. This suggests impending volatility with the potential for a breakout in either direction.

The support is the 200-day moving average at 104.399. Resistance is the 50-day moving average at 105.006.

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.

Did you find this article useful?