The US dollar index extended its decline for a second week in a row. The currency sank to a five-week low and fell by more than half a percent as soft US consumer price index numbers, along with weaker sentiment from the University of Michigan, supported the Federal Reserve’s interest rate cut in September.
Although the market’s confidence in a pending rate cut is growing, Fed officials have maintained a careful approach, emphasizing their dependence on rigorous data analysis before initiating such substantial changes.
The greenback plunged by 0.40% on Friday and posted a 5-week low at 104.084 against the major counter parts. The rally in the S&P 500 to a new all-time high curbed liquidity demand for the dollar. The currency was also undercut after the University of Michigan’s US consumer sentiment index unexpectedly fell to an 8-month low, which improves the prospects for Fed rate cuts.
Further, US Producer Price Index (PPI) for final demand rose to 2.6% YoY in June, an increase from 2.2% last month, as revealed by the US Bureau of Labor Statistics (BLS) on Friday. This outcome exceeded market expectations of 2.3%.
Annual core PPI increased by 3% during the same period, surpassing both the previous month’s rise and the anticipated market figure of 2.3%.
On a monthly basis, PPI and core PPI escalated by 0.2% and 0.4%, respectively.
Despite positive PPI data, soft CPI figures and softer UoM sentiment data (reported at 66.0 versus the forecast of 68.5 and the previous value of 68.2) continue to bolster the argument for a September rate cut.
Now, this week ECB Meeting, US Retail sales data and China Economic numbers will weight on the dollar
Technical Outlook : U.S. Dollar index
The dollar index witnessed 0.75% weekly fall, and settled at 104.084 compared to the previous week close of 104.875. the currency plunged to the low 104.041, the lowest levels since Mid-May 2024.
A long bearish candle stick formation and a negative cross over in the Relative strength index is still indicating for a bearishness in the currency. However, it would need to break below 103.8020 in order to test next support 103.5025-103.1050.
On the upside, immediate resistance is seen at 105.3580-106.3550 for this week.
Happy Trading!
Commodity Samachar
Learn and Trade with Ease
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