US Dollar Index News: DXY Wavers Ahead of Fed Minutes Release

Highlights

• DXY weaker on profit-taking, position-squaring.
• European currencies show strength; Yen falters.
• Anticipation builds for Fed’s July minutes.

Overview

The US Dollar Index (DXY) stumbled on Wednesday against major global currencies, despite early support from July’s better-than-expected U.S. retail sales. These positive sales figures underscored the nation’s economic tenacity, potentially making a stronger argument for the Federal Reserve to maintain higher interest rates. However, as investors anticipated the release of the Fed’s July minutes, the index couldn’t sustain its momentum, reflecting profit-taking behavior.

Treasuries Impact Dollar Movements

The DXY’s performance seems to be following the U.S. Treasury market closely. The 10-year U.S. Treasury yield touched its highest level since October, reaching 4.2740% on Tuesday, before settling slightly lower. Its two-year counterpart also showed similar vigor, peaking at 5.0240% on Monday. Treasury yields are edging lower on Wednesday.

European, British Currencies Exhibit Strength

Across the Atlantic, the British pound is witnessing its most significant daily increase in nearly a fortnight. This surge comes after the reveal of robust core inflation figures for July in the UK. Simultaneously, the Euro also showcased resilience, bolstered by June’s impressive industrial output data. This positive momentum in the euro zone was underpinned by a 0.5% monthly expansion in industrial production, surpassing the anticipated 0.2% rise.

Asian Markets Display Mixed Signals Amid Yen Concerns

In Asia, the yen’s ongoing weakness kept market participants vigilant. Hovering near its lowest point in nine months, the currency’s continued slide towards the 145 per dollar mark raises eyebrows. Memories of September and October of the previous year, when this level prompted significant dollar selling by Japanese regulators, are still fresh. Yet, policymakers, including Finance Minister Shunichi Suzuki, have adopted a relatively subdued stance compared to last year, downplaying the need for immediate intervention.

Short-Term Forecast: Bullish or Bearish?

Given the market dynamics, the current sentiment leans slightly bearish for the US dollar, especially with the profit-taking behavior seen ahead of the Fed’s minutes release. The immediate future could see the dollar facing headwinds, particularly if the minutes indicate a less hawkish stance by the Federal Reserve.

Technical Analysis

The US Dollar Index (DXY) ticked higher from its previous 4-hour mark, currently positioned at 103.193 compared to its earlier value of 103.091. This rise brings the index closer to its main resistance band of 103.280 to 103.424, hinting at potential downside pressure.

The DXY is above both its 200-4H moving average of 101.808 and the 50-4H moving average of 102.620, reinforcing the bullish sentiment. The 14-4H RSI at 60.18 further supports this, indicating stronger momentum as it rests above the neutral 50 level.

Summarily, the DXY’s current technical posture leans bullish, with the price threatening the main resistance zone.