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The US Dollar (DXY) edged higher, reaching 105.20, after Federal Reserve Chair Jerome Powell’s recent Congressional testimony hinted at a cautious approach to potential interest rate cuts. Despite recent signs of easing inflation, Powell emphasized the need for more convincing data before considering any adjustments.

Market Reactions and Economic Outlook

Market participants closely followed Powell’s remarks, which reiterated the Fed’s commitment to data-driven decision-making. The upcoming release of the US Consumer Price Index (CPI) on Thursday is expected to be a key factor in shaping future policy decisions.

Economists anticipate a further slowdown in headline inflation to 3.1% year-on-year, with core inflation remaining steady at 3.4%. While the probability of a July rate cut remains low, markets are increasingly pricing in the possibility of a September cut, according to the CME FedWatch Tool.

DXY Technical Analysis

Despite a recent dip below its 20-day Simple Moving Average (SMA), the DXY appears to be finding support above the 100-day SMA. Key technical indicators like the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) have turned negative but show signs of improvement.

Potential support levels for the DXY include the 104.78 zone (100-day SMA), followed by 104.50 and 104.30.

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