US Dollar Index struggles to defend 102.00 ahead of US PMI, GDP data
- US Dollar Index retreats after snapping two-day downtrend.
- Holidays in China, pre-Fed blackout triggered DXY consolidation but softer US data, hawkish ECB commentary challenged bulls.
- First readings of January PMIs, Q4 GDP will be crucial amid US recession chatters.
US Dollar Index (DXY) seesaws near 102.00 as the bulls struggle to defend the first daily gains in three, marked the previous day, during early Tuesday’s inactive trading.
The greenback’s gauge versus the six major currencies cheered the market’s consolidation the previous day before the hawkish comments from the European Central Bank (ECB) officials joined the softer US data to recall the DXY sellers. Adding strength to the US Dollar Index pullback could be the cautious mood ahead of today’s key data, namely the first readings of January’s S&P Global Purchasing Managers Index (PMI).
The one-week-long Lunar New Year (LNY) holidays in China joined the receding fears of the US recession to underpin the US Dollar Index rebound the previous day. On the same line could be the upbeat performance of the US 10-year and two-year Treasury bond yields.
Alternatively, the US Conference Board’s Leading Index for December came in as -1.0% versus -0.7% expected and -1. 1% prior. The softer start to the key data week comprising the PMIs and fourth-quarter (Q4) Gross Domestic Product (GDP) probed the DXY buyers.
On the other hand, ECB President Christine Lagarde’s comments suggesting further rate hikes to tame inflation were the latest to favor the DXY sellers. However, major attention was given to ECB Governing Council Member Peter Kazimir who said, “I am convinced that we need to deliver two more hikes by 50 basis points." The idea of a 50 bps rate hike was something that many policymakers have refrained from in recent days.
It should be observed that the talks of easing the Covid-led activity restrictions in Japan from May 2022 also appeared to have recently favored the market sentiment and weighed on the DXY.
Looking forward, the first readings of January’s S&P Global PMIs for the US will offer intraday directions while the US Q4 GDP will be crucial for the week for clear guidance. It’s worth noting that the forecasts surrounding the key data appear slightly weak and hence actual outcome will be eyed closely for better understanding amid the economic slowdown fears.
Technical analysis
The DXY bears keep the reins unless crossing a six-week-old support-turned-resistance line near 103.30.
Author
Anil Panchal
FXStreet
Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.
