US Dollar (DXY) Index News: Greenback Lower as Traders Reject 106.000 Again

US Dollar Retreats Ahead of Key Inflation Data

The US Dollar Index experienced a downturn on Thursday, reversing recent gains as traders engaged in profit-taking before Friday’s crucial Core PCE report. This shift comes after a surge fueled by hawkish Fed comments, highlighting the market’s sensitivity to interest rate expectations.

At 14:40 GMT, the U.S. Dollar Index (DXY) is trading 105.795, down 0.254 or -0.24%.

Economic Data Mixed

Thursday brought a flurry of economic indicators. Initial jobless claims decreased slightly, while durable goods orders unexpectedly rose 0.1% in May, surpassing forecasts of a 1% decline. The final Q1 GDP revision showed a slight uptick in growth, but inflation for the period increased to 3.1% from the previous 3%.

Treasury Yields Stable

US Treasury yields remained relatively unchanged as investors parsed the economic data for clues about future monetary policy. The market continues to grapple with uncertainty regarding the timing of potential Fed rate cuts.

Fed Officials’ Stance

Recent statements from Fed officials, including Governor Michelle Bowman, suggest a cautious approach to rate adjustments. Bowman indicated that while rate cuts may eventually be appropriate, the option for further hikes remains open if inflation progress stalls or reverses.

Gold Market Reaction

Gold prices stabilized after hitting a two-week low on Wednesday. The precious metal’s performance has been influenced by the strong dollar and firm bond yields, making it less attractive to non-USD investors.

Market Forecast

The short-term outlook for the US Dollar Index appears bearish. The current pullback, coupled with mixed economic data and anticipation of the PCE report, suggests potential downside risk. Traders should closely monitor Friday’s inflation data, as it could significantly impact Fed policy expectations and, consequently, dollar strength in the coming weeks.

Technical Analysis

The U.S. Dollar Index (DXY) is lower on Thursday after running into a wall of resistance at 106.103 to 106.517. Although the trend is up, the price action suggests its ripe for a correction since it doesn’t look like buyers think the 106.000 is an attractive area.

The first support is 105.628, followed by a swing bottom at 105.374 and the 50-day moving average at 105.172. The latter represents value so a test of this level is likely to attract new money.