US Dollar (DXY) Index News: Climbs Above 200-Day Moving Average: What’s Next?

Dollar Strengthens as Markets Digest Economic Data

The U.S. Dollar gained ground on Tuesday, crossing above its 200-day moving average and triggering buy stops. This rally appears largely technical in nature, occurring despite traders pricing a 100% chance of a Federal Reserve rate cut in September.

At 14:16 GMT, the U.S. Dollar Index is trading 104.458, up 0.177 or +0.17%.

Treasury Yields and Economic Outlook

U.S. Treasury yields dipped slightly as investors weighed the economic outlook ahead of key data releases this week. Markets await the second-quarter GDP figures and June’s personal consumption expenditures price index, the Fed’s preferred inflation gauge. These reports could provide insights into potential monetary policy decisions at next week’s Fed meeting.

Housing Market Slowdown

Existing home sales in June dropped 5.4% compared to May, reaching 3.89 million units on a seasonally adjusted, annualized basis. This marks the slowest sales pace since December, reflecting the impact of mortgage rates exceeding 7% in April and May. Despite this slowdown, the median price of existing homes sold in June hit an all-time high of $426,900, up 4.1% year-over-year.

Inventory and Market Shift

Housing inventory rose 23.4% from last year to 1.32 million units, representing a 4.1-month supply. This increase in supply, coupled with longer listing times, suggests a gradual shift from a seller’s to a buyer’s market. However, the supply remains below the 6-month level considered balanced.

Currency Market Movements

The euro and sterling both eased 0.02% against the dollar, while the dollar edged 0.14% lower against the yen. Gold continued to find support despite the firm greenback.

Market Forecast

The short-term outlook for the dollar appears bullish, supported by technical factors and market positioning ahead of crucial economic data and the upcoming Fed meeting. However, traders should remain vigilant as U.S. political developments and evolving economic indicators could introduce volatility in the coming weeks. The housing market may see further shifts if inventory continues to rise, potentially leading to increased sales or downward pressure on prices.

Technical Analysis

The US Dollar Index (DXY) is in a strong postition on Tuesday after crossing to the bullish side of the 200-day moving average at 104.374. This indicator could become new support.

If the upside momentum continues then look for the rally to possibly extend into the 50-day moving average at 104.890.

According to the swing chart, the main trend is down so we’re going to treat this as a short-covering rally and wait for a place to sell. This idea is supported by the bearish rate cut odds.