- The DXY goes back to 100.80 after retail sales, PPI and unemployment applications show limited surprises.
- Powell of the Fed points out possible changes in the long -term frame, maintaining a cautious posture about inflation.
- The currency markets observe volatility amid the political conversations between the US and Asia and geopolitical tensions.
- Market assessment leans towards feat cuts for September as inflationary pressures decrease.
The American dollar index (DXY), which tracks the dollar against a basket of main currencies, is quoted just below 101.00 on Thursday after the key economic data of the USA offered little upward driving. Retail sales increased a modest 0.1% in April, while the production price index was softened to 2.4% per year, below expectations. The weekly unemployment requests remained stable in 229K.
Speaking at the Thomas Laubach Research Conference, the president of the Federal Reserve (FED), Jerome Powell, reiterated the need to review the strategic language of the Fed around inflation and employment. The market reaction was moderate, with the operators changing their approach to possible currency interventions in Asia and the deteriorated tone in negotiations between Russia and Ukraine.
Daily summary of market movements: aimless
- The US retail sales increased 0.1% in April, exceeding flat growth expectations, but failed to change the feeling of the market.
- The production price index reached the soft to 2.4% year -on -year, with the underlying PPI, decelerating 3.1%, supporting a more Dovish policy.
- Unemployment requests remained stable in 229K, without showing signs again in the labor market, while continuous requests increased modestly.
- The president of the FED, Powell, said next changes in the communications of the Fed and emphasized the need to handle better future supplies.
- The markets are digging Powell’s comment that April’s PCE is probably around 2.2%, with inflation exceeds no longer being relevant.
- The operators closely monitor the volatility of FX in South Korea and Asia amid rumors of possible efforts led by the US to weaken the dollar.
- The caution in the currency market persists as the conversations between Russia and Ukraine stagnate and the US president, Trump, presses by a high -level meeting with Putin.
- The DXY lacks traction despite Powell’s comments, falling to 100.80 and reversing Wednesday’s rebound.
- The market assessment reflects increasing expectations of a Fed rates cut for September, strengthening the yield differentials and reducing USD demand.
- The general tone remains undecided, with the DXY in a limited range and geopolitical headlines cloudying the direction.
Technical analysis of the US dollar index: trapped between two forces
The American dollar index (DXY) shows indecision while there is quoted around 101.00, reversing the modest profits of the previous session. The price action is confined within a narrow range between 100.59 and 101.05. The Relative Force Index (RSI) is located at 50, and the convergence/divergence indicator of mobile socks (MACD) indicates a slight purchase impulse, although the momentum (10) reads around 1.0, reflecting a limited upward pressure. The fast RSI stock in the 70s and the amazing oscillator about 0 suggest a neutral to slightly bullish bias. However, the broader perspective remains bassist, with the Smas of 100 days and 200 days and several EMAS in the 100 pointing out sales pressure. The immediate support is found in 100.62, 100.59 and 100.56, while the resistance is observed in 100.92, 101.34 and 101.81. A clear rupture above 101.90 or a fall below 100.22 could define the next directional movement.
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.
