US Dollar gains some ground as sellers take a breather, outlook tilted to the downside

• The DXY shows modest gains, rising to 104.45.
• Markets expect the Fed to announce an early rate cut due to lower-than-expected CPI data.
• Initial jobless claims were weak and the decline in the Philadelphia Fed manufacturing index support the dovish rhetoric.

He US Dollar Index (DXY) is rising slightly to 104.45 on Thursday as sellers appear to be consolidating the strong downward move from Wednesday's session.

The US economy is hinting at a slowdown, evidenced by the unexpected increase in Initial Jobless Claims and a contraction in the Philadelphia Fed's manufacturing survey. Softer-than-expected inflation data reported on Wednesday supports this idea, causing markets to expect that the Federal Reserve (Fed) may consider rate cuts sooner rather than later, a thesis that weakens the USD.

Daily Market Summary: DXY under selling pressure as soft data alerts markets

• Wednesday's softer Consumer Price Index (CPI) signals possible disinflation, which could accelerate potential Fed interest rate cuts.
• Initial Jobless Claims for the week ending May 3 rose to 222,000, exceeding estimates. The previous week's figure was also revised to a higher 232,000.
• The Philadelphia Fed manufacturing survey (an index that assesses the state of manufacturing in Philadelphia) for May showed a contraction to 4.5, below market predictions.
• The CME's FedWatch tool predicts a roughly 75% chance of a federal funds rate cut after the September meeting, up from pre-CPI expectations of 65%.

DXY Technical Analysis: DXY Finds Some Light, Outlook Remains Bearish

The RSI remains flat in negative territory on Thursday, indicating weakening buying momentum. This means that although demand is declining, selling momentum is not strengthening. The Moving Average Convergence Divergence (MACD) is exhibiting flat red bars, suggesting a similar situation: neither the bulls nor the bears seem to have a strong control over the price momentum currently.

Looking at the SMAs, the DXY is below the 20-day SMA, indicating a short-term bearish tone. However, the fact that the index remains above the 100-day and 200-day SMAs could be signaling a protective floor secured by the bulls.