- US Dollar Index (DXY), which measures the US Dollar’s performance against a basket of six currencies, shows slight gains after reaching a fresh 15-month low of 99.578.
- June’s US CPI grew 3.0% YoY, underperforming the 3.1% forecast, while Core CPI fell by 0.5%. Concurrently, June’s PPI rose less than the expected 0.1% YoY.
- Considering these conditions, markets now expect fewer Fed rate hikes post-July FOMC, forecasting a stable Federal Funds Rate around 5.25%-5.50% in 2023.
The US Dollar Index (DXY), which measures the US Dollar (USD) performance against a basket of six currencies, recovers some ground, as the DXY prints gains of 0.18% after hitting a fresh 15-month low of 99.578. At the time of writing, the DXY exchanges hands at 99.959, shy of reclaiming the 100.000 figure.
DXY faces pressure from lower consumer and producer price indices, leading to huge losses in the week
The greenback stood under a lot of stress in a busy economic docket., mainly driven by inflation figures, with consumer prices and producer prices edging lower, weakening the US Dollar (USD).
The June US Consumer Price Index (CPI) expanded by 3.0% YoY, falling below the estimated 3.1%. Furthermore, the Core CPI, which excludes volatile items such as food and energy, decreased by 0.5%, dropping from 5.3% in May to 4.8% last month. Meanwhile, the release of the Producer Price Index (PPI) for the same period expanded by 0.1%, YoY below forecasts of 0%, while the so-called Core PPI, on a yearly basis cooled down compared to expectations of 2.6% and came at 2.4%.
Given the backdrop, market participants trimmed their bets the US Federal Reserve (Fed) would hike rates past July’s Federal Open Market Committee (FOMC) meeting on 25-26, with investors pricing in a 25 basis points (bps) increase. Hence, the Federal Funds Rates (FFR) is expected to remain through 2023 at around the 5.25%-5.50% range, as shown by the CME FedWatch Tool.
Consequently, US Treasury bond yields extended their losses. The US 2-year Treasury bond yield finished the week at 4.772%, almost 18 basis points lower than Monday’s open, while the 10-year plunged a quarter of percentage points lower, to 3.834%. That was a heavy burden for the greenback, as shown by the DXY, finishing the week with hefty losses of 2.26%.
US Dollar Index (DXY): Technical outlook
From a technical standpoint, once the DXY extended its losses past the February 2 daily low of 100.820, it opened the door for further losses. As of writing, DXY’s first support emerged on April 14, 2022, daily low of 99.571. Once cleared, the buck could edge toward the March 30, 2022, low of 97.685 before challenging the 2021 yearly low of 96.938. On the flip side, the DXY first supply area would be the February 2 low-turned resistance at 100.820, followed by the 20-day EMA at 102.037.
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 turns negative near 1.0760
The sudden bout of strength in the Greenback sponsored the resurgence of the selling pressure in the risk complex, dragging EUR/USD to the area of daily lows near 1.0760.
GBP/USD comes under pressure and challenges 1.2500
GBP/USD now rapidly loses momentum and gives away initial gains, returning to the 1.2500 region on the back of the strong comeback of the US Dollar.
Gold retreats from highs on stronger Dollar, yields
XAU/USD trims part of its initial advance in response to the jump in the Dollar's buying interest and the re-emergence of the upside pressure in US yields.
XRP tests support at $0.50 as Ripple joins alliance to work on blockchain recovery
XRP trades around $0.5174 early on Friday, wiping out gains from earlier in the week, as Ripple announced it has joined an alliance to support digital asset recovery alongside Hedera and the Algorand Foundation.
Week ahead – US inflation numbers to shake Fed rate cut bets
Fed rate-cut speculators rest hopes on US inflation data. After dovish BoE, pound traders turn to UK job numbers. Will a strong labor market convince the RBA to hike? More Chinese data on tap amid signs of slow Q2 start.