US Dollar Index News: DXY Dips as Eyes Set on ECB Rate Verdict

Highlights

• The U.S. Dollar shows a slight decline, with traders eyeing ECB’s upcoming decisions.
• A potential 25 basis point rate hike from ECB is on the horizon, influenced by inflation forecast reports.
• Traders also await U.S. producer inflation and retail sales data.

U.S. Dollar Awaits Key Decisions

The U.S. Dollar displayed a marginal decline against major global currencies on Thursday, with the trading world keenly awaiting the European Central Bank’s (ECB) imminent monetary policy statement and interest rate verdict. Concurrently, traders are on the lookout for the forthcoming U.S. producer inflation and retail sales reports.

Recent U.S. Data and Fed Expectations

Following Wednesday’s revelation that the U.S. Consumer Price Index (CPI) rose by 0.6% – the most significant increase since June 2022, market speculation around the Federal Reserve’s future decisions remained largely unchanged. Despite this uptick, the core inflation rate, which removes the volatility of food and energy prices, was pegged at 4.3% year-on-year in August, a decline from July’s 4.7%. Consequently, traders are mostly confident about the Fed maintaining steady rates on September 20, with a 40% chance of a quarter-point hike by the year’s end.

The Euro’s Response

In anticipation of the ECB’s decision, the euro has witnessed a rise, moving away from its near three-month low against the dollar. The European currency gained momentum, reaching $1.0752 before stabilizing at $1.0736. Market sentiment is torn between expecting a status quo and a potential 25 basis point rate hike from the ECB, especially following a Reuters report suggesting the bank’s inflation forecasts might exceed the 3% mark next year, overshooting the ideal 2% target.

Impact on Other Major Currencies

Other global currencies exhibited minimal movement: sterling stabilized at $1.2486, the yen firmed slightly to 147.29 against the dollar, and the Swiss franc held its ground at 0.8934 per dollar.

Short-Term Forecast

Traders are somewhat dismissive of the potential impact of U.S. data on the dollar unless it’s exceptionally divergent. The Euro, however, remains a significant determinant. A more hawkish stance by the ECB could bearishly affect the dollar index, while a milder ECB tone coupled with positive PPI and retail sales outcomes could lead to a bullish trajectory for the dollar index.

Technical Analysis

The US Dollar Index’s current 4-hour price is slightly above its previous level, standing at 104.741 compared to 104.723. Analyzing the moving averages, it’s evident that the price has recently overtaken the 50-4H moving average of 104.723 but is significantly above the 200-4H moving average, positioned at 103.538. The 14-4H RSI reads 52.25, indicating a slightly strengthened momentum.

Concerning support and resistance levels, the price currently hovers just above the main support zone (104.699-104.403) and is beneath the main resistance range (105.095-105.883). Given these factors, the market sentiment leans slightly bullish for the US Dollar Index in the short term.