.jpg)
- The US dollar received support from an increase in US Treasury yields on Thursday.
- Markets continue to show signs of caution as Fed officials express a conservative stance on adopting easing cycles.
- Mixed US economic outlook tempers dollar’s upside.
On Thursday, the US dollar rose, as measured by… Dollar index (DXY), witnessed significant strength on the back of rising US Treasury yields. This comes after a mid-week decline as market participants analyzed several recently released mid-level data releases, including soft data. Retail Figures from May. On Thursday, the US dollar shrugged off weak employment and housing data.
With regard to the United States Economic forecastsWhile there are signs of inflation easing, the measured comments of Federal Reserve officials are keeping market expectations in check. If mixed signals from the economy continue, this will likely hamper further US dollar strength.
Daily summary of market drivers: US dollar gains despite weak data
- Building permits fell from 1.44 million to 1.386 million, a smaller decline than expected.
- In addition, the number of housing starts also decreased, going from 1.352 million to 1.277 million, which is contrary to optimistic estimates.
- Initial unemployment claims fell slightly, rising from 243,000 to 238,000. Continuing unemployment claims increased from 1.813 million to 1.828 million.
- The Philadelphia Fed’s manufacturing survey for June was disappointing, coming in at 1.3 instead of the expected 5, down from the previous 4.5.
- Minneapolis Fed President Neel Kashkari noted that it could take one to two years for inflation to return to the 2% target because current wage growth still exceeds the desired rate.
- Chances of a rate cut remain at around 67% at the Fed’s next meeting on September 18, according to CME Group’s FedWatch tool.
- US Treasury bond yields rose significantly, with gains exceeding 1%. The interest rates for 2 years, 5 years, and 10 years were 4.74%, 4.29%, and 4.27%, respectively.
DXY Technical Analysis: Bullish sentiment is gaining momentum and should recover at 105.50
Technical indicators for Thursday’s session showed renewed upward momentum supported by increasing US Treasury yields. The Relative Strength Index (RSI) has stabilized above the 50 level, with a dominant green histogram at the Moving Average Convergence and Divergence (MACD), indicating continued bullish sentiment.
In addition, the DXY indicator maintains the 20-day, 100-day and 200-day simple moving averages (SMA). This, combined with bullish indicators, indicates the potential for additional gains for the US dollar. However, given the mixed economic outlook, investors should remain attentive to changes in the market landscape.
