The US Dollar experienced a slight pullback on Tuesday, following a rally that pushed the US Dollar Index (DXY) to a new 11-week high. The US Dollar’s strength was supported by recent economic data and expectations for a less aggressive Federal Reserve (Fed).
However, the market is now showing signs of risk-off sentiment, with US equity futures declining and US Treasury yields rising. This suggests that investors may be re-evaluating their expectations for interest rate cuts.
Key Factors:
- Risk-Off Sentiment: The market is showing signs of risk-off sentiment, which is weighing on the US Dollar.
- Federal Reserve: There is a growing dispersion of opinions within the FOMC regarding future interest rate cuts.
- Economic Data: The US economic calendar is relatively light this week, but investors will be watching for the Richmond Fed Manufacturing Index.
Technical Analysis:
- The US Dollar Index (DXY) is currently trading near the 103.99/104.00 resistance level.
- A break above this level could lead to further gains towards 105.00 and 105.53.
- On the downside, the 200-day Simple Moving Average (SMA) at 103.80 provides strong support.