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- The US dollar lost strength on the back of lower-than-expected retail sales numbers, fueling dovish bets on the Federal Reserve.
- Markets are digesting comments from Fed officials about placing their bets on an interest rate cutting cycle.
- Investors continue to challenge the Fed and are betting on more than one cut in 2024.
On Tuesday, the US dollar, as measured by the DXY index, fell, settling at 105.30. This decline was mainly caused by the markets’ reaction to recent comments from Federal Reserve (Federal Reserve) officials as well as lower-than-expected data. Retail May data.
United State Economic forecasts Full of mixed signals, but signs of slowing inflation are starting to emerge, which could weaken the US dollar.
Daily summary of market drivers: The dollar index is under pressure due to disappointing retail sales numbers
- Markets are now processing the words of Fed spokespeople as well as the just-released retail sales numbers for May.
- On the data front, the US Census Bureau reported retail sales growth for May at a slower pace of 0.1% versus expectations of 0.2%.
- The decline in retail sales growth is likely to weigh on the US dollar by confirming investors’ confidence in the ongoing inflation deceleration process.
- Regarding Fed speakers, Cleveland Fed President Loretta Mester expressed her preference for monitoring “a longer string of good inflation data” before making any important decisions.
- Meanwhile, Minneapolis Fed President Neel Kashkari hinted that the Fed may wait until December to make any further interest rate cuts, preferring to obtain more data before taking any action.
- Several other speakers will speak on Tuesday, and their words could shake the US dollar.
DXY Technical Analysis: Momentum is flattening, bulls are running out of time
Technical indicators indicate stable momentum but still maintain a positive stance. The Relative Strength Index (RSI) remains above the 50 level, while the Moving Average Convergence and Divergence (MACD) continues to print green bars.
As bullish activity pauses, the DXY continues to hold above the 20, 100 and 200 day simple moving average (SMA). Slowing momentum since last week may indicate a potential slowdown in the DXY index’s recent rally.
