- US Dollar Index seesaws around 1.5-month high after refreshing multi-day top post Fed Minutes.
- FOMC Minutes suggest that ‘most’ policymakers prioritize the battle against inflation.
- Global economic fears, upbeat Treasury bond yields also favored DXY bulls.
- Light calendar may allow Greenback to pare recent gains as it approaches key technical resistances.
US Dollar Index (DXY) bulls take a breather after refreshing the six-week high, making rounds to 103.50 amid Thursday’s Asian session, as market players seek more clues to defend the latest run-up. That said, the DXY cheered hawkish Minutes of the Federal Reserve’s (Fed) latest monetary policy meeting, as well as the risk-off mood to print a five-day uptrend by the end of Wednesday’s North American session.
On Wednesday, the Monetary Policy Meeting Minutes of the Federal Open Market Committee’s (FOMC) July 25-26 meeting highlighted the policymakers’ discussion on the inflation pressure, despite marking a division on the rate hike decision. That said, the Minutes also conveyed that most policymakers preferred supporting the battle again the ‘sticky’ inflation.
It should be noted that the recently firmer US data also underpin the hawkish bias about the Federal Reserve’s (Fed) next moves and propel the DXY. That said, the US Industrial Production marked a surprise 1.0% growth for July versus 0.3% expected and -0.8% prior while the Capacity Utilization for the said month also improved to 79.3% from 78.6%, compared to market forecasts of 79.1%. Further, the Building Permits edged higher to 1.442M for July from 1.441M whereas the Housing Starts rose to 1.452M for the said month versus 1.398M prior and 1.448M expected. It’s worth noting that both the Building Permits Change and Housing Starts Change improved more than market forecasts and previous readings. Previously, the US Retail Sales grew 0.7% MoM in July versus 0.4% expected and 0.3% reported in June (revised from 0.2%) and suggested strong consumer spending, mainly due to improved wages, which in turn favored the Greenback to stay firmer during early weekdays.
On a different page, fears emanating from China also underpin the US Dollar’s haven demand. That said, Chinese policymakers have been trying by all means to defy the concerns about easing economic recovery but no meaningful market reaction has been witnessed of late, which in turn flags concerns about the recession of the world’s second-largest economy and weighs on the sentiment.
Furthermore, global rating agency Fitch Ratings lowered medium-term Gross Domestic Product (GDP) projections for 10 developed economies in its quarterly Global Economic Outlook, which in turn spoiled the risk appetite and favor the DXY bulls.
While portraying the mood, Wall Street closed in the red while the US 10-year Treasury bond yields refreshed the yearly top to 4.278%.
Looking forward, a light calendar requires the traders to observe headlines surrounding China’s economic growth, as well as the Fed talks, for clear directions. Also important will be the US weekly jobless claims and Philadelphia Fed Manufacturing Survey for August.
Technical analysis
Although a clear upside break of the 200-DMA, around 103.20 by the press time, keeps the US Dollar Index buyers hopeful, overbought RSI may join a 5.5-month-old descending resistance line, close to 103.65 at the latest, to prod the DXY bulls. Following that, a rising trend line from June 14 surrounding 103.85 will precede the 104.00 round figure to challenge the upside momentum.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD drops below 1.0850 as USD rebounds
Following Tuesday's choppy action, EUR/USD came under modest bearish pressure and declined below 1.0850 on Wednesday. The recovery seen in US Treasury bond yields and the cautious market mood support the USD ahead of FOMC Minutes and weigh on the pair.
GBP/USD falls to 1.2700, erases UK CPI-led gains
After rising to its highest level in two months above 1.2750 on UK CPI data, GBP/USD lost its traction and turned negative on the day near 1.2700. The souring market mood helps the USD find demand and makes it difficult for the pair to preserve its bullish momentum.
Gold drops toward $2,400 pressured by rising US yields
Gold price turned south on Wednesday and dropped below $2,410. As markets wait for the Federal Reserve to release the minutes of the April 30-May 1 policy meeting, the benchmark 10-year US Treasury bond yield pushes higher and weighs on XAU/USD.
Shiba Inu price buy signal hints 25% upswing on the horizon for SHIB holders Premium
Shiba Inu (SHIB) price continues its struggle above a key hurdle. This development comes as SHIB, an ERC-20 meme coin, reacts to the Ethereum spot ETF approval news.
Sticky service prices put BoE rate cuts on ice
UK price growth fell last month, with the annual headline rate falling to 2.3% from 3.2%. This is the lowest level since the summer of 2021, and was driven by a decline in the price of household energy bills.