US Dollar steady ahead of inflation data

• USD steady course remains unaffected by geopolitical tensions despite the lack of substantial fundamentals.
• Fed officials maintain positive projections of the US labor markets amid looming concerns of slow job growth.
• The market maintains the previous week’s predictions; the first rate cut is anticipated in September with marginally lower odds.

The US Dollar (USD), measured by the US Dollar Index (DXY), indicated continuous horizontal movement above the 103.00 level during Monday’s trading session. This follows relatively quiet market sentiment and unaltered US stock index futures, with the 10-year US yield sticking close to 4% in the earlier part of the day.

Though market expectations for upcoming monetary policy decisions remain the same, the US economic outlook continues to suggest growth above trend, insinuating a potential overestimation of the market for aggressive easing in the future.

Daily digest market movers: US Dollar stability persists ahead of inflation figures

• Market trends from the previous week transition smoothly into the current week. JPY and CHF underperformed on Monday, although global bond yields and equity markets are slightly boosted.
• Due to the lack of significant data releases on Monday, markets are upholding last week’s trends while watching for important US data releases slated for this week, including PPI, CPI, and Retail Sales data.
• The market is still fully pricing in 100 bps of easing by year-end, extending to 175-200 bps of total easing over the next 12 months.
• However, this easing path seems unlikely unless the US economy sinks into a deep recession. More data is required to redirect this dovish narrative.

DXY technical outlook: Bearish bias persists amid continuous buyer efforts

DXY’s technical outlook remains bearish, with buyers struggling to evolve a significant move. The index retains its position beneath the 20, 100 and 200-day Simple Moving Averages (SMAs), conforming to a predominantly bearish bias. The momentum-based Relative Strength Index (RSI) continues its position below 50, suggesting consistent selling pressure. Additionally, the Moving Average Convergence Divergence (MACD) remains in negative terrain, showing lower red bars. Despite the week’s gains, the overall technical outlook has not significantly improved, suggesting the continuous possibility for a correction.

Support Levels: 103.00, 102.50, 102.20.

Resistance Levels: 103.50, 104.00.