Galeanu Mihai
The U.S. Dollar Index (DXY) and U.S. Treasury yields fell for the second consecutive week following the release of softer-than-expected Consumer Price Index (CPI) data. The US dollar index (DXY) slipped 0.75% after softer inflation numbers increased the odds of a September interest rate cut by the Fed.
The DXY (DXY) closed on the recent low prints around 104.00 made in early June. The US Treasury yields (US2Y) (US10Y) also slumped to a four-month low on soft CPI data.
The U.S. headline inflation rate eased to 3.0% Y/Y. On a Y/Y basis, core CPI increased 3.3%. Producer Price Index (PPI) data came in hotter than expected. However, traders remained confident that the central bank would cut rates in September.
The prior week highlighted Powell’s take on rate cuts before the CPI data report, emphasizing the need for more data to confirm progress toward the Fed’s 2% inflation goal. The probability of a 25-basis-point cut in September now stands at 90.3% from 69.7% on Wednesday, according to the CME FedWatch tool.
For the week ahead, investors will closely monitor the ECB interest rate decision. The analyst expects the BOE to keep rates steady but will look for signals on the expected cut in September. The investors will also keep an eye on inflation reports from the UK, Euro, and Japan.
Technical analysis
The weekly technical picture remains bearish, with moving averages showing a sell sign, according to Trading View technical analysis.
Thursday’s close below 200DMA (104.23, which reverted to solid resistance and caps upticks) showed a bearish picture. Its 200-day simple moving average has moved below the 100-day simple moving average, which is considered a bearish signal.
Investors looking to monitor the strength of the U.S. dollar may also look to further analyze these groups of currency pairs along with a couple of currency-based exchange-traded funds:
Currency Pairs: (EUR:USD), (GBP:USD), (USD:JPY), (USD:CHF), (AUD:USD), (NZD:USD), (USD:CAD), and (USD:CNY).
Dollar-Based ETFs: (UUP), (USDU), and (UDN).