- DXY rally extends into Friday, hitting its highest level since early May.
- Consumer Confidence from the UoM figures come in below expectations, dampening the market mood, but DXY maintains its daily gains.
- US Treasury yields remain low, signaling a risk-off market environment.
On Friday, the US Dollar Index (DXY) shrugged off weak data releases and continued its positive traction. The Index now hovers around its highest level since early May near 105.80 and then retreated to 105.60 but held daily gains.
The economic outlook for the US remains a mixed bag. The Federal Reserve (Fed) continues to hold its economic activity revisions steady but revised its Personal Consumption Expenditures (PCE) estimates higher. Additionally, preliminary analysis suggests softening inflation but a resilient labor market, pushing the Fed to anticipate fewer rate cuts. On Friday,
Consumer Confidence data from the University of Michigan showed poor results that reached a seven-month low. This made the USD trim part of its daily gains as much of the US economy revolves around consumer spending.
Daily digest market movers: DXY holds the line after UoM data, markets adjust to Fed’s decision
- On Wednesday, FOMC dot plot update shows median expectancy of only one rate cut for 2024.
- Markets were previously anticipating between one or two rate cuts in 2024, but this altered after the Fed announced its decision.
- University of Michigan Consumer Confidence Index for the US has fallen from 69.1 in May to 65.6 in early June, which is below the market's expectation of 72. This decline also reflected in the Current Conditions Index, falling from 69.6 to 62.5.
- Consumer expectation index also fell slightly from 68.8 to 67.6. The five-year inflation outlook rose from 3% to 3.1%.
DXY technical analysis: Bulls continue to dominate, holding above SMAs
As of Friday’s session, the technical indicators maintain their positive outlook. The Relative Strength Index (RSI) remains above 50 and the Moving Average Convergence Divergence (MACD) continues to reflect green signaling bars. Furthermore, the index remains standing above its 20, 100 and 200-day Simple Moving Average (SMA). The combination of these factors strengthens the bullish outlook for the DXY.
