US Dollar Index News: DXY’s Resilient Rise Amid Powell’s Rate Hike Hint

Highlights

• The U.S. dollar maintains an upward trajectory, marking a sixth week of gains.
• Jerome Powell’s recent comments suggest more rate hikes, but caution muddies the waters.
• Eyes are fixed on the PCE deflator and non-farm payrolls, due this week, for Fed cues.

Dollar’s Steady Climb

The U.S. dollar continued its ascent on Tuesday, rising slightly after its recent strong performance. However, market players remained cautious in anticipation of significant economic data releases later this week. The dollar index, measuring its strength against a basket of major currencies, increased by 0.14% to 104.355, marking its sixth consecutive week of gains. This rally was primarily driven by robust U.S. economic indicators and increasing speculation that interest rates might remain elevated.

Powell’s Comments and Upcoming Data

Federal Reserve Chairman Jerome Powell’s recent remarks reinforced the belief that additional rate hikes might be on the horizon to tame persistent inflation. His promise of caution at forthcoming sessions, however, injected some ambiguity into the market’s direction. The spotlight now rests on imminent U.S. releases, especially the PCE deflator and non-farm payrolls. With these crucial figures expected this week, traders eagerly await cues to decipher the Fed’s next move.

Interest Rate Speculations and Euro Zone Watch

Market dynamics currently indicate a 78% probability of the Fed maintaining current interest rates in the subsequent month. However, expectations of a rate hike by the November session have surged to 60%. Simultaneously, the euro zone’s CPI report, set to be released on Thursday, holds immense significance, especially in light of the impending ECB decision in September.

Yen Under Pressure

A growing interest rate differential between Japan and the U.S. has weighed heavily on the yen. Its relatively low yields have rendered it vulnerable to short-selling. The currency dipped to its weakest point against the dollar since November 9th, a mere hair away from triggering potential intervention from Japanese regulators. Notably, Japan had previously intervened in the currency markets last September when the dollar breached the 145 yen mark.

Short-term Forecast

Given the anticipation around U.S. economic data releases and the uncertainty surrounding interest rate decisions, the market sentiment appears cautiously optimistic. While the dollar’s strength persists, potential fluctuations based on forthcoming data could tilt the market’s bullish stance.

Technical Analysis

The current DXY price stands at 104.277, which is a slight increase from the previous 4-hour price of 104.136. This price level is above both the 200-4H moving average of 102.249 and the 50-4H moving average of 103.689, indicating bullish momentum. The 14-4H RSI registers at 60.61, signifying a stronger momentum as it’s above the neutral 50 mark but still below the overbought threshold.

The current price is approaching the main resistance area between 104.299 to 104.403 while comfortably sitting above the main support zone of 103.273 to 103.013. Overall, the market sentiment for DXY appears to be bullish.

Be prepared for a technical bounce on the first test of the resistance zone. However, watch for a potential upside breakout if fresh data supports a Fed rate hike.