DXY Strengthens on Positive Economic Data and Easing Fed Expectations

The US Dollar continued its winning streak, gaining for the fifth consecutive day, as markets digested recent economic data and adjusted their expectations for Federal Reserve interest rate cuts.

The US Dollar Index (DXY) climbed to near 104.00, buoyed by a combination of factors. First, the European Central Bank’s (ECB) President, Christine Lagarde, expressed concerns about the Eurozone economic outlook, which weakened the Euro and boosted the Dollar. Second, strong US economic data, including a surprise increase in September Retail Sales and a decline in weekly jobless claims, reinforced the perception of a resilient US economy.

USD Drivers:

Fed Rate Cuts: Markets are now pricing in two rate cuts by year-end and a total of 150 basis points of easing over the next 12 months.

Strong US Data: Retail Sales and jobless claims data point to a healthy US economy.

ECB Concerns: Lagarde’s comments on the Eurozone economy have benefited the Dollar.
Technical Outlook:

The DXY remains in a bullish trend, having crossed above the 100-day Simple Moving Average (SMA). A break above the 200-day SMA at 103.80 would further strengthen the bullish outlook. However, overbought conditions suggest a potential correction.

Support and Resistance Levels:

Support: 103.00, 102.50, 101.30
Resistance: 103.30, 103.50, 104.00
While the US Dollar’s upward momentum is strong, traders should exercise caution due to the potential for a short-term correction.