Strong S&P PMIs fails to boost US dollar

Despite high S&P PMIs, the US dollar is trading at a lower level; down -0.36% as per the DXY Index, which fell, earlier during the North American session to 103.05 as a result. the DXY reading is 103.149 at the time of writing. The The US S&P PMI for January performed better than anticipated.

Right now, everyone is watching Thursday’s PCE results for December. There was downward pressure on the Dollar Index, which dropped to 103.05. The release of robust economic activity data, however, might limit the USD’s losses and cause investors to postpone their expectations for a rate cut. This Thursday’s Personal Consumption Expenditures (PCE) data will set the short-term pace.

The US economy continues to be strong while investors watch important data and this week’s central bank meetings. The market reduced its easing forecasts to around 125 bps over 2024, down from nearly 175 bps earlier this month, which helped the Greenback recover despite the absence of significant data or any Fed speakers.

The S&P Global Composite PMI, which is published by S&P Global, increased from 50.9 to 52.3 in January. According to S&P Global, the Manufacturing PMI for January was 50.3, above the consensus estimate of 47.9, and showed a strong increase in manufacturing activity. The Services PMI ended at 52.9, indicating a strong expansion, much exceeding the prior reading of 51.4 and the consensus of 51.

These numbers could provide a challenge to the US Federal Reserve’s efforts to combat inflation, leading them to postpone the easing cycle’s beginning. The market’s expectations for the beginning of the easing cycle have changed to May, according to projections from the CME FedWatch Tool, as the likelihood of a cut in March is now close to 42%.

The US’s December Personal Consumption Expenditures (PCE) data, the Fed’s favoured measure of inflation, are released on Thursday, and those odds might change.

From a technical standpoint, the daily chart’s indicators show shifting dynamics. The Relative Strength Index (RSI) shows a decline; although it is still in positive territory, the negative slope suggests that the buying momentum has been waning.

Support Levels: 103.00, 102.80, 102.60 (20-day SMA).
Resistance Levels: 103.50 (200-day SMA),103.70, 103.90.