The currency commonly referred to as the greenback, as measured by the USD Index (DXY), continues its downward trend for the week, reaching levels close to multi-session lows around 100.60 on Thursday.
The USD Index Considers Information From the ECB
The index has been trading defensively for the past three sessions, and on Thursday, it exhibited a clear conviction as it broke below the significant support level of 101.00.
The dollar’s decline is further intensified as investors analyze the recent FOMC event on Wednesday. During this event, the Federal Reserve increased the Fed Funds Target Range (FFTR) by 25 basis points, which was widely expected. Additionally, Chief Powell emphasized during the press conference that future rate decisions will be contingent upon forthcoming data.
The session in the US docket was quite intriguing, featuring a range of significant releases.
What to Keep an Eye Out for About USD
Following the Federal Reserve’s widely anticipated decision to raise interest rates on Wednesday, the index experienced a decline in momentum and subsequently retreated to levels below 101.00.
In the current situation, the dollar may encounter additional challenges due to the data-dependent approach the Federal Reserve takes. This is happening amidst ongoing disinflation and a slowdown in the labor market.
In addition, the speculation regarding the possibility that the July interest rate increase may have marked the conclusion of the ongoing cycle of rate hikes will continue to exert downward pressure on the dollar’s value shortly.
One of the prominent topics currently being discussed is the ongoing debate surrounding the potential outcomes of the US economy, specifically whether it will experience a soft or hard landing. The terminal interest rate is approaching its peak, while there is speculation regarding potential rate cuts in the latter part of 2023 or early 2024. The current geopolitical landscape is characterized by notable activity and dynamism involving Russia and China. The ongoing trade conflict between the United States and China has been a significant global concern.
Critical Levels for the USD Index
The index has experienced a decline of 0.37% and is now at 100.66. It is expected to encounter resistance at the psychological level of 100.00, followed by a 2023 low on July 13 at 99.57 and a weekly low on March 30 at 97.68. Alternatively, the breach of 101.64 (weekly high recorded on July 25) could pave the way towards 102.57 (55-day Simple Moving Average) and 103.54 (weekly high observed on June 30).