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US Dollar Index News: DXY Climbs on US GDP Surge, Euro Zone Inflation Eases

By:
James Hyerczyk

A stronger U.S. economy and softer Euro Zone inflation figures contribute to Dollar's (DXY) intraday reversal.

US Dollar Index News: DXY Climbs on US GDP Surge, Euro Zone Inflation Eases

In this article:

Highlights

  • U.S. GDP exceeds forecasts, Dollar strengthens.
  • Euro falters amid Euro Zone inflation drop.
  • Mixed outlook persists for U.S. Dollar.

U.S. Dollar Rebounds on Strong GDP Growth and Euro Retreat

The U.S. Dollar witnessed a remarkable recovery against major currencies on Wednesday, driven by a robust U.S. Gross Domestic Product (GDP) report and a weakening Euro. The GDP growth in the third quarter exceeded initial estimates, showcasing a stronger U.S. economy fueled by significant business investment and government spending.

Economic Highlights

The revised GDP report indicated a 5.2% annualized growth, surpassing the initial 4.9% reading and the 5% forecast by economists. This surge primarily stemmed from increased nonresidential fixed investment and substantial government expenditure, although consumer spending saw a slight decline. Additionally, corporate profits showed a notable increase of 4.3% during this period.

Inflation and Monetary Policy Outlook

Inflation measures revealed mixed signals. The quarterly personal consumption expenditures price index, closely monitored by the Federal Reserve, saw a slight downward revision, while the chain-weighted price index moved upward. These developments, coupled with comments from Fed official Christopher Waller suggesting a possible rate cut, impacted bond yields and the dollar’s trajectory.

Currency Movements and Market Reactions

The dollar index rebounded, halting a significant monthly decline. Conversely, the Euro weakened following lower-than-expected inflation rates in major European economies. Investors are now keenly anticipating the euro zone-wide inflation figures and the U.S. PCE index for further direction.

Short-Term Forecast

Despite today’s technical rebound in the U.S. Dollar, the underlying sentiment remains bearish. Market dynamics suggest that traders are increasingly betting on the Federal Reserve pausing its rate hike campaign. This shift in expectations, reflecting a more dovish stance from the central bank, is dampening the bullish momentum for the dollar.

While we may witness a technically driven bounce in the short term, it is unlikely to significantly alter the bearish sentiment that currently prevails in the market. The near-term outlook, therefore, suggests a cautious approach, with a likelihood of continued bearish trends for the dollar.

Technical Analyst

Daily US Dollar Index (DXY)

Analyzing the U.S. Dollar Index (DXY) with the given data, the current daily price of 102.805 is slightly above the previous close of 102.738, indicating a marginal upward movement.

This price is below both the 200-day (103.596) and 50-day (105.808) moving averages, suggesting a bearish trend in the longer term. The price is currently below the main resistance at 103.572 but above the minor resistance at 102.853, which now acts as a support level. This positioning near minor resistance-turned-support hints at a potential pivot point for the day.

Overall, the market sentiment leans towards bearish, as indicated by the price’s position relative to key moving averages and resistance levels.

 

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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