US Dollar steadies as investors digest S&P Global PMIs

Despite poorer PMI data, the US currency held constant and even increased on Monday. The market pricing in 75 basis points of Fed easing by year-end. The Federal Reserve’s Goolsbee pledged that “many cuts” will be necessary in 2019. There are signs that the US economy is growing, even if there are also signs that it is slowing down. The Fed states that the new data will dictate the pace of the easing cycle.

Fed Governor Goolsbee said on Monday that interest rates must decrease and that “many more rate cuts” will be required. However, Bostic noted that the last half-point rate decrease does not set a pattern for future reductions and that risks to the labor market have increased. Minneapolis Fed President Neel Kashkari emphasized that the Federal Reserve is still focused on data to guide its choices.

September’s Composite S&P PMI increased at a slower rate, rising from 54.6 in August to 54.4 in September. The services PMI increased at a better-than-expected rate of 55.4, but the manufacturing PMI unexpectedly dropped to 47.0. The market is pricing in 75 basis points of easing by year-end as the Fed continues to lean dovish. Traders will be watching the Fed’s upcoming remarks and whether new data supports a 50 or 75 basis point cut. The US dollar is probably going to stay weak until the market adjusts for Fed predictions. Data coming in will be crucial.

Although there has been some momentum in the DXY index, the indications are still bearish. At 40, the Relative Strength Index (RSI) indicates a lackluster purchasing environment. The trend is being further supported by the Moving Average Convergence Divergence (MACD), which is showing diminishing green bars.

There are supports at 100.00, 100.50, and 100.30. There are three resistance levels: 101.00, 101.30, and 101.60. If the DXY index keeps rising, it will probably run into resistance at current levels. On the other hand, it can indicate more weakness if it drops below the support levels.