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US Dollar Index Tests Two-Week Decline above 101.50; Us Nfp on the Horizon
US Dollar Index licks its wounds near its monthly low, having been inactive recently. In conjunction with the holiday, the reevaluation of Friday's US inflation figures will prompt a corrective pullback. ISM PMIs and US employment data can encourage buyers to return.
During Monday's lethargic Asian session, the US Dollar Index (DXY) halted its two-week-old downward trend and rebounded from a monthly low. In spite of this, the dollar index fluctuates at 101.70, having renewed the monthly low around 101.43 the day before.
The DXY's recovery may be attributable to the market's inactivity during the US bank holiday as well as fresh discussion regarding the Fed's need to accelerate rate hikes in light of recent inflation statistics. Following the Fed's favored inflation indicator, the Core PCE Price Index, The Times published an analysis indicating that inflation puts the Fed under additional pressure to raise interest rates.
In April, US data on consumption, income, and inflation were mixed, and the dollar index reaffirmed its monthly low on Friday. The US Personal Consumption Expenditure (PCE) numbers for April were mixed, but generally negative, as the Core PCE Price Index matched estimates at 4.9 percent YoY vs 5.2 percent before. In addition, Personal Income increased less than anticipated, while Personal Spending increased.
Traders had earlier reacted positively to the risk-on sentiment by boosting Wall Street benchmarks while leaving bond yields unchanged. During the US Memorial Day, it is noteworthy that the S&P 500 Future shows slight gains while the 10-year US Treasury yields remain stable at 2.74 percent.
In addition, a light calendar and a bank holiday in the United States will limit market volatility, but the risk catalysts may provide traders with entertainment. Above all, this week's US employment report for April may also assist the dollar index in recouping recent losses in anticipation of stronger readings.
Technical evaluation
Although a definite fall breach of the monthly low, around 102.35, sends DXY bears to the 50-DMA level near 101.40, any additional downside is unlikely as the RSI has rapidly slipped into oversold territory on shorter timeframes.
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