- The index recovers the rise after the GDP figures.
- The US economy contracted 0.9% year-on-year in the second quarter.
- Weekly claims increased more than expected by 256,000.
The USD is under pressure after the release of the 2nd quarter GDP figures, although it manages well to keep trading in the 106.50/60 zone so far when it follows the US dollar index (DXY).
US dollar index capped at 107.00
The greenback maintains the positive bias after the post-GDP boost as market participants continue to reassess the recent Fed rate hike and Chairman Powell’s comments.
In fact, the US economy shrank by 0.9% in the April-June period, marking a second consecutive quarter of contraction and therefore a technical recession.
Additional data showed initial claims increased by 256,000 in the week to July 23.
What to watch out for around the dollar
The index is under downward pressure after Wednesday’s Fed meeting and is now flirting with the 106.00 area.
Despite the momentum, the dollar’s constructive view seems reinforced by the Fed’s divergence from most of its G10 counterparts (especially the ECB) combined with bouts of geopolitical turmoil and the occasional resurgence of risk aversion.
On the other hand, market rumors of a possible US recession could temporarily undermine the dollar’s upward trajectory.
Technical levels
Now the index is up 0.19% at 106.66 and a break above 107.42 (post-FOMC weekly high Jul 27) would expose 109.29 (15 Jul 2022 high) and then 109.77 (monthly high Sep 2022). 2002). On the other hand, initial support emerges at 106.05 (weekly low Jul 28), followed by 103.67 (weekly low Jun 27) and finally 103.41 (weekly low Jun 16).
Source: Fx Street
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