US Dollar Seems Neutral Amid Cautious Remarks By Fed Policymakers

As of right now, the US dollar index is trading at 104.50, indicating a neutral performance (DXY). Strong data growth in the second quarter (Q2) and the cautious language used in the Federal Reserve’s policymakers’ most recent remarks, remarks, and statements are the reasons for the current stability.

US Economy’s Q2 Growth

In Q2, the US economy continued to grow strongly despite sporadic signals of a slowdown. This expansion has a direct bearing on the cautious approach taken by Fed representatives. Their unwillingness to lower interest rates seems to be bolstering the dollar and restraining its decline.

Recent Federal Reserve Statements

The Consumer Price Index (CPI) and Retail Sales figures for April, as well as an increase in the weekly Initial Jobless Claims, caused the USD to lose value earlier this week. Fed officials are still circumspect, though. The Atlanta Fed’s president, Raphael Bostic, concedes that inflation picked up speed in April but says the Fed isn’t quite ready to cut the policy rate just yet. The current monetary policy stance is seen adequate by Cleveland Fed President Loretta Mester, and Richmond Fed economist Thomas Barking highlights the significance of achieving inflation targets.

Market Expectations

The markets are speculating that an easing cycle may begin in September. There is a higher chance that month of the first rate cut, according to the CME FedWatch Tool.

Technical Forecast:

Technically speaking, the DXY outlook is still negative even though signs are flattening. Though it is still flat in negative territory, the Relative Strength Index (RSI) does not entirely reflect a strong selling trend. There may be a respite in the strong bearish trend, as indicated by the Moving Average Convergence Divergence (MACD).

Technical Outlook:

Simple Moving Averages (SMAs), on the other hand, paint a different image. Following a drop and subsequent recovery at the 100-day SMA, the DXY Index is still below the 20-day SMA. Although bears have maintained their position, the fact that they have managed to stay above the 100 and 200-day SMAs indicates that bulls are still somewhat present.

The market is expecting possible rate cuts later this year, which is keeping the US dollar in a neutral position despite the cautious remarks from the Fed and strong Q2 GDP.