US dollar stays resilient as investors digest latest US data

After Monday’s unsuccessful attempt at a rebound, the US Dollar is holding steady against its main competitors’ currencies.

The US Dollar Index is still varying just below 100. While industrial production decreased in June, US retail sales increased somewhat. During the first trading period of Tuesday’s American session, the dollar was able to attract buyers. After falling to a daily low below 99.60, the US Dollar Index (DXY) rose towards 100.00 and reversed its dip.


The US Census Bureau said on Tuesday that retail sales in the US increased by 0.2% in June to $689.5 billion. Additionally, the 0.3% gain from May was raised up to 0.5%. Retail Sales Ex-Autos grew by 0.2% during the same period, somewhat less than the 0.3% market expected.

According to the US Federal Reserve’s monthly report released on Tuesday, industrial production in the US decreased 0.5% for the second consecutive month in June.

After Tuesday’s opening bell, the Dow Jones Industrial Average is up more than 0.5%, while the S&P 500 is up 0.15%. Following Monday’s erratic trading, the benchmark 10-year US Treasury bond yield is still significantly negative at roughly 3.75 percent.

On Monday, the major indices on Wall Street finished up. The Nasdaq Composite Index increased by about 1%, helped by the upward performance of IT shares.

According to figures issued by China’s National Bureau of Statistics (NBS) early Monday, the country’s real Gross Domestic Product (GDP) increased 6.3% in the second quarter compared to the same period last year. This estimate fell short of the market expectation of 7.3% but followed the 4.5% rise seen in the first quarter. China’s full-year GDP prediction was reduced by Citigroup from 5.5% to 5%.
According to US Treasury Secretary Janet Yellen, there is a strong probability that the Biden administration will implement outbound investment limitations on China.

The dollar experienced big losses last week as dismal US inflation data rekindled hopes that the Federal Reserve would raise interest rates by 25 basis points (bps) in July, signaling the end of the current expansionary cycle.

Following a 4% increase in May, the US Consumer Price Index (CPI) increased by 3% annually in June. In the same time frame, the yearly Producer Price Index (PPI) increased by 0.1%.

Rate cuts before the end of the year are increasingly likely, although key rates may not stay at high levels for an extended period of time in the event of an increasingly fast decline in inflation and weaker economic data. The USD would weaken much more as a result.

The Consumer Sentiment Index increased from 64.4 in June to 72.6 in the flash estimate for July, according to a research released on Friday by the University of Michigan. The General Business Conditions Index fell from 6.6 in June to 1.1 in July, according to the Empire State Manufacturing Survey for July from the Federal Reserve Bank of New York, which was published on Monday.

A 25-basis point Fed rate increase in July is almost fully priced in by the markets. There will most likely be one additional rate increase in December, with a 20% chance.

The US Dollar Index (DXY) is still technically oversold on Tuesday following Monday’s tumultuous action, with the Relative Strength Index (RSI) signal on the daily chart remaining far below 30.

To draw buyers and produce an extended correction, the DXY must rise above 100.00 (the psychological threshold) and confirm that level as support. In that case, the prior support level of 101.00 can be considered the next goal for the recovery.