- The dollar index fell about 107.00 after the strong fall on Thursday.
- The US retail sales fell 0.9% in January, below expectations, feeding speculation about feat cuts.
- The US treasure yields continue to decrease with 10 years below 4.50%.
The US dollar index (DXY), which tracks the performance of the dollar against six main currencies, remains stable after registering losses in the previous session. At the time of writing, the DXY is around 107.00, since economic data continues to paint a mixed panorama. The weak retail sales weigh in the feeling, but industrial production provides some support.
What moves the market today: the US dollar weakens while the operators reevaluate the perspectives of the Fed
- The US retail sales fell 0.9% in January, much worse than -0.1% planned, which generates concerns about consumer spending.
- December retail sales were checked to 0.7%, slightly compensating the latest disappointing data.
- Industrial production increased 0.5% in January, exceeding 0.3% expectations but slowing down from the growth of 1.0% of December.
- The weak retail sales can lead to operators to reassess expectations on the Federal Reserve Rate Road.
- The president of the FED, Jerome Powell, reiterated that the settings of monetary policy require tangible progress in inflation or weakness in the labor market.
- For now, the CME Fedwatch tool shows a 55% probability of unchanged fees in June, reflecting market uncertainty.
- The US treasure yields continue to decrease abruptly with 10 -year yield falling to 4.47%, which makes investors lose interest in the US dollar.
Technical perspective of the DXY: Greater downward risk as the bassist impulse accumulates
The US dollar index remains under pressure after losing the simple mobile average (SMA) of 20 days, pointing out a bassist change. The Relative Force Index (RSI) continues to weaken, confirming the negative impulse, while the indicator of convergence/divergence of mobile socks (MACD) remains in bassist territory.
Immediate support is seen in the 100 -day SMA about 106.30, with a break below this level that probably confirms a short -term negative perspective. Upwards, the resistance is now seen in 107.50, followed by the 20 -day SMA in 108.00.
US dollar FAQS
The US dollar (USD) is the official currency of the United States of America, and the “de facto” currency of a significant number of other countries where it is in circulation along with local tickets. According to data from 2022, it is the most negotiated currency in the world, with more than 88% of all global currency change operations, which is equivalent to an average of 6.6 billion dollars in daily transactions. After World War II, the USD took over the pound sterling as a world reserve currency.
The most important individual factor that influences the value of the US dollar is monetary policy, which is determined by the Federal Reserve (FED). The Fed has two mandates: to achieve price stability (control inflation) and promote full employment. Its main tool to achieve these two objectives is to adjust interest rates. When prices rise too quickly and inflation exceeds the 2% objective set by the Fed, it rises the types, which favors the price of the dollar. When inflation falls below 2% or the unemployment rate is too high, the Fed can lower interest rates, which weighs on the dollar.
In extreme situations, the Federal Reserve can also print more dollars and promulgate quantitative flexibility (QE). The QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is an unconventional policy measure that is used when the credit has been exhausted because banks do not lend each other (for fear of the default of the counterparts). It is the last resort when it is unlikely that a simple decrease in interest rates will achieve the necessary result. It was the weapon chosen by the Fed to combat the contraction of the credit that occurred during the great financial crisis of 2008. It is that the Fed prints more dollars and uses them to buy bonds of the US government, mainly of financial institutions. Which usually leads to a weakening of the US dollar.
The quantitative hardening (QT) is the reverse process for which the Federal Reserve stops buying bonds from financial institutions and does not reinvote the capital of the wallet values ​​that overcome in new purchases. It is usually positive for the US dollar.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
