US dollar index falls to 2-week low near 103.20 ahead of Powell

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  • Moderate DXY pullback finds support near 103.20.
  • US retail sales surprised to the upside in April.
  • Chief Powell will speak later in the NA session.

The US dollar index (DXY), which tracks the USD against a host of its major competitors, remains on the defensive below 104.00 on Tuesday.

US dollar index eyes Powell

The index maintains its weekly decline, although it manages to rebound from previous lows around 103.25/20, or two-week lows.

The dollar’s further decline comes amid a further improvement in the risk complex, as well as a technical pullback from the overbought condition in DXY seen in the past two sessions.

Positive results from the US docket helped the dollar trim some of the daily decline after retail sales expanded 0.9% m/m in April, and 0.6% for sales excluding autos. Additionally, industrial production increased 1.1% and capacity utilization improved to 79.0%.

Later in the session, Chairman Powell will speak at the Wall Street Journal’s Future of Everything Festival in New York. Additionally, Philadelphia Fed P.Harker (2023 voter, aggressive) and Cleveland Fed L.Mester (voter, aggressive) will also speak later.

What to watch out for around the dollar

So far this month, the dollar found good resistance in the 105.00 zone, which caused a moderate downward correction. In the dollar’s favour, investors’ expectations of a stricter rate path from the Federal Reserve and its correlation with yields, the current high inflation narrative and strong labor market health. On the downside for the dollar is emerging speculation about a “hard landing” of the US economy as a result of more aggressive Fed normalization.

Technical levels

The index is now down 0.75% at 103.40 and faces next support at 103.22 (weekly low May 17), followed by 102.35 (weekly low May 5) and then 99.81 (weekly low May 21). april). On the other hand, a break above 105.00 (May 13, 2022 high) would open the door to 105.63 (Dec 11, 2002 high) and finally 106.00 (round level).

Source: Fx Street

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