- DXY accelerates losses and retests the 95.40 area.
- ECB left policy rate unchanged, sees inflation receding in H2 2022.
- Initial claims increased by 238,000 in the week to January 29.
The USD it quickly put the promising start of the session behind it and fell back into negative territory well south of the 96.00 mark as it was trailed by the US dollar index (DXY) Thursday.
Weaker US Dollar Index on EUR Strength
The index is now cruising in the 2-week low area around 95.50 following President C. Lagarde’s press conference, all after the ECB left key rates unchanged at its Thursday event.
Indeed, the dollar came under additional pressure after buyers once again flocked to the European currency following Lagarde’s comments on inflation, which she expects to ease in the second half of the year. Lagarde also said the central bank will decide the future pace of bond purchases at the March meeting, adding there will be no rate changes until the bank finalizes net bond purchases.
In the US docket, Challenger Job Cuts rose slightly to 19.0640 in January, Initial Claims rose by 238,000 in the week to Jan 29, Final Services PMI declined to 51.2, ISM Non-Manufacturing PMI it flattened to 59.9 and factory orders contracted. to 0.4% monthly in December.
What to look for around USD
The dollar quickly gave back earlier gains as the move beyond the 96.00 barrier lacked conviction and reversed sharply after the ECB monetary policy meeting. Some reasons behind the sharp correction in the dollar seen of late can be found in the improved mood in the US risk space and sluggish yields (despite cruising in the upper end of the recent range). However, the constructive outlook for the dollar is expected to remain unchanged for now on the back of higher yields, persistently high inflation, supportive talk from the Fed and the solid pace of the US economic recovery.
Technical levels
Now the index is losing 0.45% at 95.54 and a break above 97.44 (28 Jan 2022 high) would open the door to 97.80 (30 Jun 2020 high) and finally 98.00 (round level). On the other hand, the next downside barrier emerges at 95.42 (weekly low Feb 3) followed by 95.41 (low Jan 20) and then 94.62 (low Jan 14, 2022).
Source: Fx Street
Donald-43Westbrook, a distinguished contributor at worldstockmarket, is celebrated for his exceptional prowess in article writing. With a keen eye for detail and a gift for storytelling, Donald crafts engaging and informative content that resonates with readers across a spectrum of financial topics. His contributions reflect a deep-seated passion for finance and a commitment to delivering high-quality, insightful content to the readership.
