US Dollar Index News: DXY Struggling Amid Rate Hike Uncertainty, Stronger Euro

Highlights

• Dollar bulls may be hinting at a pause in the current three-day rally. 
• Traders shrugging off higher yields as Fed rate confusion continues to dominate the trade. 
• Hawkish ECB comments underpin Euro while capping Dollar’s gains. 

Dollar Rise Dampened by Euro Uptick

The U.S. Dollar is trading lower against a basket of currencies on Thursday as sellers book profits following a three-day counter-trend surge. The price action is being fueled by the thought that the Fed may be finished raising interest rates although Federal Open Market Committee (FOMC) members failed to confirm the notion throughout the week. Traders are also responding to a jump in the Euro, following hawkish remarks from European policymakers.

At 14:25 GMT, the U.S. Dollar Index (DXY) is trading 105.520, down 0.008 or -0.011.

Treasury Yield Impact

Dollar traders are ignoring today’s rise in U.S. Treasury yields as investors looked to economic data and comments from Federal Reserve officials for clues about what could be on the horizon for the economy.

The Fed left interest rates unchanged when it met last week, but the possibility of further interest rate hikes was not taken off the table and Fed Chair Jerome Powell noted that rate cuts were not yet being considered.

That left many investors with questions about how long interest rates could stay elevated and if a recession is likely to hit the U.S. economy or the Fed is anticipating a soft landing. They are hoping to find clues in comments from Fed speakers this week as little key economic data is expected to be published, according to CNBC.

Euro Finds Footing on Hawkish Policy Remarks

The Euro bounced back from earlier weakness after the European Central Bank’s (ECB) chief economist said he had not seen enough progress in taming inflation. Although this did not trigger an immediate breakout in the Euro, it did provide some support, for the single currency, especially if the Fed is serious about holding rate steady.

Nonetheless, we’re likely looking at a knee-jerk reaction to a potentially hawkish comment. With the US economy moving higher on all cylinders, and the Euro Zone preparing for recession, it’s hard to get bullish the Euro and bearish the U.S. Dollar.

Technical Analysis

The US Dollar Index is edging lower on Thursday after a small three day retracement. The price action suggests that traders are showing respect for the 50-day moving average that comes in today at 105.800.

The reaction at 105.800 keeps the index on the weak side of the 50-day moving average, setting up the possibility that a sustained move under this level will lead to further weakness.

If sellers recapture control and are able to sustain a move under the 50-day moving average then look for an eventual near-term test of the 200-day moving average at 103.573.