Despite positive housing data, dovish Fed bets, US dollar retreats

The US dollar saw a decline, falling to its lowest level since March. Federal Reserve wagers are still skewed toward a dovish position, which affects the USD. Robust housing data was unable to stop this trend.

On Thursday, the US Dollar measured by the DXY index saw an extension in its decline below 104.00, despite the strong housing data reported during the European session. Factors such as dovish bets on the Federal Reserve and lower US Treasury Yields are responsible for putting downward pressure on the USD.

The outlook for the US economy shows signs of disinflation, and markets are keeping confidence in a potential cut in September. The Federal Reserve officials continue to show hesitation in rushing to cuts and maintain a data-dependent approach but seem to put a cut in July on the table.

Data concerning Housing Starts in June reported an improvement of 3%, amounting to 1.35 million units. According to the data unveiled by the US Census Bureau on Tuesday, this figure follows a decrease of 4.6% recorded in May.

Building Permits saw a 3.4% increase following a 2.8% decrease in the preceding month. According to Reuters, Thomas Barkin, the president of the Richmond Federal Reserve, indicated that one of the topics to be covered at the policy meeting in July would probably be whether or not it is still appropriate to refer to inflation as rising. A rate cut in September appears to be priced in, according to the CME FedWatch Tool, which put pressure on the USD.

The forecast for DXY is still unfavourable, with a small correction to the upside probable. The DXY is struggling to reclaim the 104.00 region despite the fall. The DXY may see a minor pullback even if the daily indicators, such as the Moving Average Convergence Divergence (MACD) and Relative Strength Index (RSI), are well below the 50-mark and suggest an almost oversold situation. The levels of 103.50 and 103.00 provide strong support. Nonetheless, the technical picture is still pessimistic overall.