On Monday, the US Dollar Index, which tracks the greenback against a basket of six trade-weighted peers, stayed in one of its tightest trading ranges in recent months and is now lifeless at 97.33, where it closed the previous week.
The trading volume, which was already low during the Asian and European sessions, thinned out even further in the NA session as the American traders enjoyed their long Memorial Day weekend. Until tomorrow's data, the greenback could continue to have a tough time making a decisive move in any direction.
The Federal Reserve’s favorite inflation measure, the core Personal Consumption Expenditures (PCE) index, will be released tomorrow. The last data, released for March, revealed that the index moved further away from Fed's 2% target rate as it came in at 1.6% on a yearly basis. The CME Group FedWatch Tool shows that the probability of a 25 bps June rate hike is at 86.5%. If tomorrow's data shows an improvement towards 2%, the odds of a rate hike could rise even further, further supporting the DXY. Additionally, both the personal spending and personal income figures are expected to advance following March's dismal readings.
Furthermore, solid earning reports from big retailers in the last couple of weeks suggest that consumers are spending again, ramping up the expectations for tomorrow. If the Wall Street responds positively to the data, we could see the U.S. Treasury yields move higher, increasing the demand for the greenback.
Technical outlook
The index could encounter the initial support at 97 (psychological level) ahead of 96.70 (May 23 low and, 95.90 (Nov. 11 low). To the upside, resistances are located at 97.50 (May 26 high), 98 (May 18 high/psychological level) and 98.75 (May 16 high).
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD eases to near 1.0700 ahead of German inflation data
EUR/USD is paring gains to near 1.0700 in the European session on Monday. The pair stays supported by a softer US Dollar, courtesy of the USD/JPY sell-off and a risk-friendly market environment. Germany's inflation data is next in focus.
USD/JPY recovers after testing 154.50 on likely Japanese intervention
USD/JPY is recovering ground after sliding to 154.50 on what seemed like a Japanese FX intervention. The Yen tumbled in early trades amid news that Japan's PM lost 3 key seats in the by-election. Focus shifts to the US employment data and the Fed decision later this week.
Gold price holds steady above $2,335, bulls seem reluctant amid reduced Fed rate cut bets
Gold price (XAU/USD) attracts some buyers near the $2,320 area and turns positive for the third successive day on Monday, albeit the intraday uptick lacks bullish conviction.
Ripple CTO shares take on ETHgate controversy, XRP holders await SEC opposition brief filing
Ripple loses all gains from the past seven days, trading at $0.50 early on Monday. XRP holders have their eyes peeled for the Securities and Exchange Commission filing of opposition brief to Ripple’s motion to strike expert testimony.
Week ahead: FOMC and jobs data in sight
May kicks off with the Federal Open Market Committee meeting and will be one to watch, scheduled to make the airwaves on Wednesday. It’s pretty much a sealed deal for a no-change decision at this week’s meeting.