United States FX Today: US Dollar stable before US Consumer Confidence data

The US Dollar (USD) is holding steady in a narrow range on Monday, as investors scrutinize the evolution of household sentiment in the United States. The US Dollar Index (DXY), which measures the greenback's performance against a basket of major currencies, stands at around 97.81, down 0.4% for the session.

Traders remain cautious ahead of the publication of the Conference Board's US Consumer Confidence index, expected on Tuesday at 14:00 GMT. This indicator is one of the key barometers of household morale and, by extension, of their propensity to spend – a key driver of the US economy.

Determinants of the US economy

The US economy remains buoyed by a still robust labor market, but signs of weakness are piling up in sentiment surveys.

In August, the Conference Board index fell by 1.3 points to 97.4, with expectations still anchored below the 80 threshold, traditionally interpreted as heralding a recession.

"Consumer confidence dipped slightly in August, but remains in the same zone as over the past three months", explained Stephanie Guichard, Senior Economist at the Conference Board.

In particular, she pointed out that "job and income expectations have weakened further, while concerns about prices and trade tariffs have resurfaced".

The latest data for August also showed an increase in household inflation expectations to 6.2% year-on-year, from 5.7% in July, which could complicate the task of the Federal Reserve (Fed), whose inflation target stands at 2%.

Household morale aside, the outlook for consumer spending is also weighing heavily. Purchase intentions for durable goods showed a marked decline for certain discretionary products, such as televisions and tablets, while travel declined for the second month running.

These signals reflect increased caution, which could have repercussions on fourth-quarter growth if the trend continues.

Traders will therefore be keeping a close eye on the September publication. A rebound in the index could give the US Dollar some breathing space and fuel expectations of a more patient Fed on rate cuts. On the other hand, a further weakening would reinforce the scenario of a slowing US economy, weighing on the currency.

DXY technical analysis: The US Dollar remains vulnerable

US Dollar Index 4-hour chart. Source: FXStreet.

Despite Thursday's attempted rebound, extending a bullish move from the low at 96.22, the US Dollar Index remains on a short-term downtrend overall.

Indeed, bulls will need to mark a more significant breakout before considering a more pronounced reversal. A first signal would be given by a break above the recent peak at 98.60, which could pave the way for a test of 99.00.

On the downside, a pullback below the bullish support line at 97.70 could accentuate downward pressure, with potential targets around the 100-period Simple Moving Average (SMA) on the 4-hour chart at 97.58.

Further down, DXY could then reach the bottom of the downtrend channel at 96.90.