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US Dollar Retreats After Early Gains, Jobless Data on Tap

The US Dollar (USD) is currently trading near its lows for Thursday after earlier gains in Asian trading. This reversal comes despite initial optimism sparked by the hawkish tone of the FOMC minutes released Wednesday.

Market Reaction to FOMC Minutes:

  • Initial Safe-Haven Bid: The FOMC minutes initially spooked markets, leading to a flight to safety and a temporary rise in the USD’s value.
  • Waning Risk Aversion: However, this risk aversion sentiment faded as positive earnings reports, like Nvidia’s, failed to trigger a broader risk-on rally. The Chinese semiconductor index even declined in Asian trading.

Upcoming Economic Data:

  • Focus on PMI: The release of PMI data for May from Europe, the UK, and the US will be a key event today, providing insights into economic activity across these regions and potentially impacting currency valuations.
  • US Jobless Data: Weekly US jobless claims numbers will also be released, offering clues on the health of the US labor market.
  • Fed Activity Indicators: Additional Fed activity indicators might further influence market sentiment towards the US Dollar.

Technical Analysis (USD Index – DXY):

  • Attempted Rally Stalls: The DXY attempted to climb towards 105.00 but faltered before reaching that level.
  • Concerns Over Inflation: The hawkish tone of the FOMC minutes regarding inflation initially boosted the USD, but this effect seems temporary.
  • Disinflation Back on Track?: Recent data suggests that disinflation might be progressing, potentially leading to a weaker USD.
  • Resistance and Support: On the upside, resistance lies at 105.12 and 105.52. Conversely, support is found at the 100-day SMA (104.25) and potentially 104.11 and 103.00 if the decline continues.

The USD’s direction will likely hinge on the upcoming economic data and any further signals regarding the Fed’s monetary policy stance. The PMI figures and jobless claims could influence the USD’s value relative to other currencies. Keep an eye on these data releases and any Fed pronouncements for further insights.