- The DXY indicator saw an early drop to 104.00, then recovered to reach 104.40, after which it continued its downward trend.
- The overall and the component measures of the Producer Price Index (PPI) showed signs of moderation in October. Additionally, the United States experienced a decline in Retail Sales, which fell short of initial expectations.
- Concerns have been raised among investors regarding the potential prioritization of robust economic activity data over the moderation of inflation by the Federal Reserve.
- The weekly Jobless Claims report will be released on Thursday in the United States, while various Federal Reserve officials are scheduled to make public statements.
The US dollar (USD) value increased considerably during Wednesday’s trading session. This upward movement was primarily attributed to the release of robust US retail sales data for October. However, this development has raised concerns among investors, as Federal Reserve (Fed) officials may perceive it as a potential obstacle to advancing inflation.
On the other hand, taking into account the recent deceleration in inflation and employment growth within the national economy of the United States, it is unlikely that the Federal Reserve will decide to raise interest rates during the upcoming meeting in December.
This is because the Fed meets every month. Given the circumstances above, the financial institution will be presented with supplementary Consumer Price Index (CPI) and Nonfarm Payrolls reports before its forthcoming determinations in 2023. These reports possess the potential to exert an influence on the institution’s ultimate decision regarding the implementation of a rate hike.
The Robust Performance of Retail Sales in the United States and Rising Yields Support the Dollar.
- The US Dollar Index has experienced a recovery, rising to 104.40 from a previous low of approximately 103.98. This current level represents the index’s lowest point since September.
- According to the US Bureau of Labor Statistics, the October US Producer Price Index (PPI) experienced a year-on-year increase of 1.3%, which was lower than anticipated. This figure fell short of the projected 1.9% rise. A monthly decline of 0.5% was recorded, falling short of the expected 0.1% growth.
- Furthermore, October’s Core Producer Price Index (PPI) failed to meet projected forecasts. The reported figure for the year-on-year growth rate stands at 2.4%, falling short of the projected 2.7% and exhibiting a decrease from the previous recorded value of 2.7%.
- In contrast, the Retail Sales data for October exhibited a performance that surpassed expectations, registering a decline of 0.1% month-on-month (MoM) compared to the anticipated 0.3% decrease.
- US Treasury yields experienced a modest rebound, as the 2-year rate rose to 4.91%, while the five and 10-year rates climbed to 4.52% and 4.53%, respectively.
- Based on the data provided by the CME FedWatch Tool, it has been observed that the probability of a 25-basis-point increase in December stands at null. According to market speculation, there is an increasing belief that rate cuts may be implemented earlier than initially anticipated, potentially as early as March or May of 2024.
Bulls on the US Dollar Step in and Defend the 100-day Simple Moving Average, but the Prognosis Remains Bearish.
The daily candlestick analysis reveals that the DXY currently has a technical perspective that ranges from neutral to bearish, and this can be seen to be the case if one looks closely enough. There was a discernible slowdown in bullish momentum during the most recent session, which took place on Tuesday.
The RSI has demonstrated a downward trend beneath its midsection, consistent with a bearish mood in the market. In addition, the MACD graph shows that the red bars are getting more significant.
From a broader perspective, it is noteworthy that the index has experienced a decline, with the bears exerting influence and causing it to fall below the 20-day Simple Moving Average (SMA). However, it is essential to highlight that the index remains positioned above the 100 and 200-day SMAs, indicating that the bulls maintain control over the larger time frames.
The support levels for the given asset are as follows: 104.15, which corresponds to the 100-day Simple Moving Average (SMA); 103.60, which aligns with the 200-day SMA; and 103.30.
The resistance levels currently observed in the market are identified at 104.50, 105.00, and 105.30.