The US Dollar (USD) opened flat on Wednesday following a quiet European session and an uneventful testimony from Federal Reserve Chair Jerome Powell. Powell reiterated the Fed’s commitment to holding interest rates steady until inflation convincingly reaches its 2% target.
Market focus now shifts to Wednesday’s events, including a 10-year Treasury Note auction and speeches from several Fed officials. These events are expected to provide further insight into the central bank’s thinking and the broader economic outlook.
Key Market Drivers:
- Mortgage Applications: Weekly mortgage applications declined slightly for the week ending July 5th.
- Wholesale Inventories: May data came in as expected at 0.6%.
- Fed Speakers: Powell, Bowman, Goolsbee, and Cook are all scheduled to speak on Wednesday.
- Equity Markets: European and US equities are trading in positive territory.
- FedWatch Tool: Markets are pricing in a 70% probability of a 25-basis-point rate cut in September.
US Dollar Index (DXY) Technical Analysis:
The DXY is stuck in a holding pattern, searching for direction after Powell’s recent comments. The 55-day Simple Moving Average (SMA) at 105.16 acts as the first resistance level, followed by 105.53 and 105.89.
On the downside, the double support at 104.80, formed by the 100-day SMA and a green ascending trendline, is a crucial area to watch. A break below this level could trigger a deeper correction towards the 200-day SMA at 104.41 and potentially even lower.
Outlook:
The USD remains range-bound as markets await further clues from Fed speakers and key economic data releases. The upcoming 10-year Treasury Note auction and CPI data on Thursday could be catalysts for greater volatility.
