US Dollar Holds Steady Before Key Inflation Data

USD Index image

The US Dollar (USD) is trading sideways on Friday, following a volatile week marked by weak economic data.

Market Recap:

  • Another Downbeat Data Release: Further weak housing data and a downward revision of US GDP growth for Q1 weighed on the USD, pushing it back to levels seen earlier in the week.
  • Trump Conviction and Political Uncertainty: The recent conviction of former President Trump and the upcoming GOP nomination add another layer of uncertainty to the market environment.

Focus on PCE Data:

  • Friday’s release of the Personal Consumption Expenditures (PCE) Price Index – the Fed’s preferred inflation gauge – is the main event for investors. It will be crucial in determining whether the disinflation process is on track, potentially leading to a Fed rate cut in September.
  • Chicago PMI: The Chicago Purchasing Managers Index will also provide additional insights into the health of the US economy.

Technical Analysis (USD Index):

  • Undecided Direction: The USD Index (DXY) is currently undecided, hovering around key support levels.
  • Upside Potential: If the DXY reclaims and holds the 55-day SMA (104.98) and the 105.00 level, it could climb towards 105.52 and 105.88.
  • Downside Risk: A break below the 200-day SMA (104.43) and the 100-day SMA (104.40) could trigger a decline towards 104.30 and potentially lower.

The US Dollar is on hold as investors await the PCE data. A strong inflation reading could bolster the USD, while a softer figure might pave the way for a potential rate cut later this year. The ongoing political uncertainty adds another dimension to the market dynamics.


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