The US Dollar Index (DXY) strengthened on Monday despite lingering uncertainties surrounding the Federal Reserve’s (Fed) September rate cut decision. While signs of disinflation are evident, the overall robust performance of the US economy, reflected in recent Q2 GDP and July S&P Global PMIs data, might encourage the Fed to adopt a cautious approach towards a rate cut.
Market Focus:
The upcoming two-day FOMC meeting concluding on Wednesday, along with the release of crucial labor market data throughout the week, will be pivotal in shaping market sentiment and the direction of the US Dollar.
Key Developments:
- FOMC Meeting: The market anticipates the Fed to maintain current interest rates, acknowledging the strong US economy. However, a potential rate cut in September remains in focus.
- Labor Market Data: Investors are keenly watching labor market data releases, as these will significantly influence market expectations regarding the Fed’s September decision.
- Chair Powell’s Press Conference: While Powell’s press conference is likely to emphasize labor market uncertainties, his comments could significantly impact market sentiment.
Technical Analysis:
The DXY index is showing signs of recovery, bouncing back from the 200-day Simple Moving Average (SMA). The next target for the index is the 20-day SMA. Key technical indicators like the RSI and MACD, while still in negative territory, are gradually moving towards positive terrain.
Support levels for the DXY are identified at 104.30 and 104.15, while resistance levels are observed at 104.60 and 104.80.
