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US Dollar Index News: DXY Firms Ahead of Crucial Retail Sales Data

By:
James Hyerczyk
Published: Jan 17, 2024, 13:27 GMT+00:00

US Dollar Index is higher on retail sales anticipation, Waller's rate views, and bullish DXY outlook tied to Fed policies.

US Dollar Index (DXY)

Key Points

  • U.S. Dollar Index reaches one-month high of 103.58
  • Waller’s comments bolster Fed’s hawkish outlook
  • Global factors, retail sales shape dollar’s trajectory

Retail Sales in Focus Amid Dollar’s Surge

The U.S. dollar index soared to a one-month peak, reaching 103.58, amid global economic uncertainties and ahead of the key U.S. December retail sales data. This rise, following a notable 0.67% increase on Tuesday, underscores the market’s heightened anticipation of the retail sales report due at 13:30 GMT today.

Investors are eagerly awaiting this data as it serves as a crucial barometer for the U.S. economy’s vigor, with a projected 0.4% rise in December sales hinting at the American consumer’s resilience in the face of economic challenges.

Influence of Federal Reserve’s Stance

Federal Reserve Governor Christopher Waller’s recent comments have significantly influenced the dollar’s strength. Waller’s assertion that the U.S. is close to achieving the Fed’s 2% inflation goal, yet cautioning against premature rate cuts, has bolstered the dollar. Investors are interpreting this as a sign of a sustained hawkish stance by the Fed, which is supportive of the dollar.

Treasury Yields and Market Sentiment

The mixed movements in Treasury yields, with the 10-year yield hovering above 4% and the 2-year yield rising, reflect the market’s focus on upcoming data and Federal Reserve comments. This cautious sentiment in the Treasury market is echoed in the forex space, where the dollar has strengthened against most major currencies, including the Japanese yen and the Australian dollar.

Global Context and Currency Reactions

Internationally, the dollar’s rally is reinforced by soft Chinese economic data and pushback by European Central Bank officials against early easing. These factors, coupled with the U.S. retail sales report, are pivotal in shaping the dollar’s trajectory. The Euro and the British pound’s movements against the dollar are also indicative of the broader market’s response to central bank policies and economic indicators.

Short-Term Forecast for the US Dollar Index

Looking at the short-term forecast for the U.S. Dollar Index, the market sentiment leans towards bullishness, primarily driven by the Fed’s hawkish stance and the anticipation surrounding the U.S. retail sales data.

A stronger-than-expected retail sales figure could further fuel the dollar’s ascent, emphasizing the robustness of the U.S. economy. Conversely, a weaker figure might temper the dollar’s rally but is unlikely to significantly alter the bullish trend set by broader global economic factors and central bank policies.

In summary, the U.S. Dollar Index is expected to maintain its upward momentum in the short term, closely tied to the outcomes of the impending retail sales data and ongoing global economic developments.

Technical Analysis

Daily US Dollar Index (DXY)

The US Dollar Index (DXY) is currently exhibiting a subtle yet potentially significant shift in its market dynamics. With its current daily price of 103.453, the DXY is just above the 200-day moving average of 103.440, indicating a potential breakout. This position above both the 200-day and 50-day moving averages, the latter being 103.039, suggests an emerging bullish sentiment.

Additionally, the DXY is hovering around the minor resistance level of 103.572, which if breached, could signal further upward momentum. The current position also indicates support above the 102.853 minor support level.

Overall, the DXY’s current stance, especially its proximity to key moving averages and resistance levels, leans towards a bullish market sentiment in the short term.

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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