- US Dollar, down 0.80% last week, now at lowest level since mid-June.
- Anticipation builds with the upcoming release of the June inflation figures and Fed talks.
- Market is pricing in less than 10% odds of a cut in July and around 80% in September.
The US Dollar continues to struggle amid signs of disinflation in the US economy, fostering confidence in a potential September rate cut from the Federal Reserve (Fed) among market participants. This week, Fed Chair Jerome Powell and other governors’ words might bail out the USD and limit the losses if they remain cautious.
Despite the trailing softness in the US indicators, Fed officials are still reluctant to embrace cuts, opting to remain data-dependent and might continue asking for patience.
Daily digest market movers: US Dollar continues soft ahead of CPI and Powell’s testimony
- Among the most noteworthy events of the week are Chairman Powell’s Semiannual Monetary Policy Report to Congress, multiple Fed members speaking, and the release of inflation data for June.
- On Thursday, the headline Consumer Price Index (CPI) is expected to have dropped two ticks to 3.1% YoY, while the core figure is expected to remain steady at 3.4% YoY.
- As for now, the market predicts less than a 10% chance of a rate cut at the July 31 meeting, with the odds shooting to around 80% for September.
DXY technical outlook: DXY’s struggle persists as it resides below 20-day SMA
Following the DXY’s slip below the 20-day Simple Moving Average (SMA) and shrinking by 0.80% last week, the technical outlook has shifted for the worst. Both the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) have slumped into negative territory.
Meanwhile, the 104.70 zone, marked by the 200-day SMA, continues to provide strong support. If the selling pressure continues, the 104.50 and 104.30 areas could potentially put a stop to further losses.
