US Dollar Index News: Robust PMI Fuels DXY’s Resurgence Amid Global Rate Hikes

Highlights

• US Dollar Index steadies after a five-month contraction in business activity was snapped. 
• S&P Global’s U.S. Composite PMI reaches its highest level since July, strengthening the Fed’s stance on high interest rates.
• Bank of Japan under scrutiny as traders eye possible yield cap changes amid global rate hikes.
• The euro falls as data reveals a dip in the euro zone’s business activity.

US Dollar Index Rallies on Robust PMI; Keeps Global Currencies in Check

The US Dollar Index, a gauge for the greenback against a basket of six global currencies, showed signs of resilience, steadying at 106.412. This stability comes on the back of positive PMI data from Tuesday, signaling the end of a five-month contraction in U.S. business activity. S&P Global’s flash U.S. Composite PMI, which encompasses both manufacturing and services, reached its highest level since July. This robust data offers the Federal Reserve a sturdy platform to sustain high interest rates, buoying the dollar in the process.

Bank of Japan: Under Pressure Amid Rising Global Rates

The resilient dollar kept the Japanese yen close to the significant 150-mark. This has made traders vigilant for any signs of intervention by the Bank of Japan. With global interest rates on the ascent, the pressure is mounting on Japan’s central bank to reconsider its existing yield cap, making next week’s policy meeting a much-anticipated event.

Euro Zone: Negative Business Activity Data Impacts Euro

The dollar’s robust showing had a downward pull on the euro, with the European currency last trading 0.13% lower at $1.0574. The single currency slid 0.75% in the previous session following data showing a dip in the euro zone’s business activity, contributing to the strength of the Dollar Index.

Sterling Struggles Amid Gloomy Data

Meanwhile, the British pound has been lagging, shedding 0.3% of its value to $1.2121. Lackluster economic indicators, including a weakening labor market and a contractionary PMI, reaffirmed the view that the Bank of England will likely keep rates steady in its imminent policy decision, which plays into the Dollar Index’s hands.

Inflation Surge Props Up Australian Dollar

On the other side of the Pacific, the Australian dollar saw an uptick, touching a two-week high after the country’s CPI exceeded market expectations. The rise in inflation has led traders to tighten the odds of a potential rate hike by the Reserve Bank of Australia (RBA) next month, further animating the forex markets.

Short-term Forecast: Bullish for US Dollar Index

In summary, bolstered by strong PMI data and the possibility of sustained high interest rates by the Federal Reserve, the Dollar Index looks poised for a bullish short-term outlook. This robust performance is keeping other key global currencies like the yen and the euro at bay, signaling that the U.S. dollar remains a dominant force in the currency market.

Technical Analysis

The US Dollar Index (DXY) is currently trading at 106.419, slightly above its 50-day moving average of 105.276 and well above the 200-day moving average of 103.347, indicating a bullish stance.

The asset has shown marginal gains compared to the previous close at 106.241, supporting a short-term bullish outlook.

The current price stands between minor support and minor resistance levels of 105.628 and 106.904, respectively. Given that the price is closer to the minor resistance, breaking through could target the main resistance at 107.970.

Overall, the market sentiment for DXY edges bullish.