- The index loses even more ground and touches 108.00 again.
- US retail sales increased more than expected in June.
- Flash Consumer Sentiment will follow in the American session.
The US dollar index (DXY), which measures the USD against a set of its main competitors, continues to fall to reach two-day lows near 108.00 at the end of the week.
The US dollar index turns its attention to the University of Michigan index
The index maintains the bearish tone on Friday, although it remains on track to close the third consecutive week with gains.
The USD, meanwhile, remained subdued following comments from the St. Louis Fed’s Bullard, who now put a 100 basis point rate hike on the table (almost ruled it out on Thursday) and added that a “relatively soft landing ” is still your base case.
The dollar’s downward correction responds to improving sentiment surrounding the risk complex, while DXY’s overbought condition also adds to the ongoing correction.
The dollar’s decline also comes after overall US retail sales rose 1.0% month-on-month in June, as did core sales. Also, industrial production contracted 0.2% mom in June and expanded 4.2% in the last twelve months.
Later in the session, consumer confidence and business inventories will be released.
What to watch out for around the USD
The index rose and hit new cycle highs above 109.00 on Thursday. However, it should be noted that the recent sharp movement of the dollar responds largely to the rapid fall of the euro and the persistent uncertainty surrounding a possible recession in the old continent.
The Fed’s divergence from most of its G10 counterparts (especially the ECB), coupled with geopolitical turmoil and a resurgence of risk aversion among investors, is expected to provide additional support for the dollar. On the other hand, market rumors of a possible US recession could temporarily undermine the dollar’s upward trajectory.
Technical levels
Now the index is down 0.31% at 108.29 and faces next contention at 107.47 (July 13), followed by 103.67 (weekly low June 27) and finally 103.41 (weekly low June 16). On the other hand, a break above 109.29 (15 Jul high) would expose 109.77 (Sep 2002 monthly high) and then 110.00 (round level).
Source: Fx Street
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