US Dollar (DXY): Struggles as Traders Eye Growth, Inflation Reports

Highlights

• Investors wary of slower US growth, lower inflation
• Traders anticipate rate hike in May, pause in June
• Euro up, yen struggles, waiting for US GDP and jobs data

Overview

The dollar is testing a more than one-week low against a basket of major currencies Monday afternoon in generally light trading, as investors continued to price in interest rate cuts this year by the Federal Reserve after a widely expected rate increase at next week’s policy meeting.

At 18:03 GMT, June US Dollar Index futures are trading 101.120, down 0.432 or -0.43%. The Invesco DB US Dollar Index Bullish Fund ETF (UUP) is at $27.66, down $0.09 or -0.34%.

Investors Cautious as US Growth Slows

Investors are wary of potential slower growth and lower inflation in the US, causing the US dollar to struggle in maintaining its gains from last week.

Traders are looking ahead to two critical reports on growth and inflation later this week and have priced in another 25 basis point rate hike after the Federal Reserve’s May 2-3 policy meeting.

However, traders also anticipate the Fed to pause its rate hiking campaign in June, reflecting concerns over the potential negative impact on the economy.

Euro Rises as Investors Eye ECB Decisions

The Eurozone’s upcoming inflation and growth data and the European Central Bank’s meeting next week, where it is also expected to lift rates, are also being watched by investors. The euro is up 0.5% against the dollar and has hit a 10-day high of $1.1050.

Bank of Japan Governor Sparks Yen Woes

The yen has struggled amid remarks from new Bank of Japan governor Kazuo Ueda about the need to maintain monetary easing ahead of the Bank of Japan meeting on Friday.

Investors Await Key US Economic Data

The US GDP and personal consumption expenditure data are also being closely watched by investors. The dollar and yen have remained within their well-worn ranges, and traders are waiting for key central bank meetings and the US jobs data next week.

Technical Analysis

From a daily technical viewpoint, June US Dollar Index futures are trading inside a pivot zone at 101.180 – 101.000. The technicals appear to be in favor of a downside move.

Today’s move under 101.450 triggered a sharp break 101.180. If this level fails then look for the selling to possibly extend into the next potential support at 101.000. This is a potential trigger point for an acceleration into a support cluster at 100.420 – 100.345.

On the upside, look for solid resistance at 101.450, followed by 101.695.

In order to stop the price slide, aggressive counter-trend buyers are going to have to come in at 101.180 – 101.000. With the trend down, a turnaround in this area could produce a secondary higher bottom, which will be a strong sign that new buyers have arrived.

For a look at all of today’s economic events, check out our economic calendar.