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US Dollar DXY reduced losses on strong Q2 GDP data. The US economy seems to be holding up, but dovish bets on the Fed are still in place. The Fed continues to take a data-dependent approach in the interim and holds off on making any cuts very soon.
Following a better-than-expected Q2 GDP report, the US Dollar, as measured by the DXY, saw a slight increase on Thursday, offsetting earlier losses and stabilizing at 104.30. Despite this, there is still a good likelihood that the Federal Reserve (Fed) would lower interest rates in September, which would seem to limit the dollar’s upside.
The economic outlook for the US shows mixed signs but signals of impending disinflation make the market confident in a September cut by the Fed. Despite the pressure, bank officials remain reluctant to hastily implement cuts and maintain a data-dependent stance.
The US Bureau of Economic Analysis announced its first estimate of the GDP for the second quarter on Thursday, indicating an expansion at an annual rate of 2.8%. This encouraging number, which came in over the 2% market estimate, comes after a 1.4% gain in the first quarter.
Additional information revealed that the number of Initial Jobless Claims for the week ending July 19 was 235K, which was more than anticipated. On the down side, there was a notable 6.6% decline in June’s durable goods orders. The CME FedWatch Tool is still indicating that a rate reduction in September is likely.
Technical factors
The DXY index fluctuates around the crucial 200-day Simple Moving Average (SMA) line, which offers strong support, notwithstanding any possible headwinds. As long as the Moving Average Convergence Divergence (MACD) and Relative Strength Index (RSI) are both in negative area, bearish signals will continue. The 20-day SMA’s bearish crossover with the 100-day SMA accomplished on Wednesday gave the markets one more sell signal. Resistance is anticipated at 104.50 and 105.00, with key support levels located at 104.30 (the 200-day SMA) and 104.00.
