The US Dollar Index (DXY) experienced a pullback on Tuesday, settling at 105.30, as markets reacted to a combination of softer-than-expected Retail Sales data and cautious remarks from Federal Reserve (Fed) officials.

Economic Landscape: Disinflationary Signs and Cautious Fed

Recent US economic data paints a mixed picture, with signs of slowing inflation gaining traction. This has put pressure on the US Dollar, as investors increasingly anticipate a potential pause or even a reversal in the Fed’s tightening cycle.

Market Movers: Retail Sales Miss and Fed Speak

• Weaker Retail Sales: May’s Retail Sales figures fell short of expectations, growing at a mere 0.1% instead of the projected 0.2%. This slowdown in consumer spending suggests a potential cooling in economic activity.
• Fed’s Cautious Rhetoric: Fed officials like Loretta Mester and Neel Kashkari have expressed a preference for a “longer run of good-looking inflation data” and a wait-and-see approach before considering further rate cuts, respectively.

Technical Analysis: DXY Momentum Slows, Bulls Face Resistance

While technical indicators still show a positive bias for the DXY, momentum appears to be flattening. The Relative Strength Index (RSI) remains above 50, but the Moving Average Convergence Divergence (MACD) is indicating a potential slowdown in bullish momentum. The index is still holding above its key moving averages, but the recent rally seems to be losing steam.

Key Takeaways:

• The US Dollar weakened on Tuesday due to softer Retail Sales data and cautious remarks from Fed officials.
• The market is increasingly pricing in the possibility of the Fed pausing or reversing its rate hike cycle.
• The technical outlook for the DXY suggests a potential slowdown in the recent bullish trend.