US Dollar (DXY) Index News: Lower Yields Pressure Greenback, Underpinning Gold

Dollar Weaker but Near Eight-Week High

The U.S. dollar edged lower on Monday but remained near an eight-week high. The dollar index, which tracks the greenback against six major currencies, was last at 105.444, down from 105.91, the highest level in nearly eight weeks.

At 13:49 GMT, the U.S. Dollar Index is trading 105.444, down 0.388 or -0.37%.

Gold Prices Rise on Monday

Gold prices rose slightly on Monday, supported by easing U.S. Treasury yields, making non-yielding bullion more attractive. Spot gold was up 0.27% at $2,326.63 per ounce, with U.S. gold futures rising 0.35% to $2,339.40. The focus is on upcoming U.S. economic data, particularly the Personal Consumption Expenditures (PCE) price index due on Friday, which could influence the Federal Reserve’s interest rate decisions.

Yen, Euro, and Pound Movements

The yen fell to 159.94 per dollar, approaching a 34-year low due to the Bank of Japan’s decision to delay reducing bond-buying stimulus until July. Despite brief recoveries and market jitters over potential intervention by Japanese authorities, the yen remains pressured. The euro, impacted by political uncertainty from the upcoming French election, rose 0.39% to $1.0733 but is down 1.2% in June. The British pound also experienced fluctuations, reacting to broader dollar strength and political factors.

Upcoming Economic Data Crucial

The U.S. PCE price index, expected to show annual growth slowing to 2.6% in May, will be crucial this week. A softer reading could strengthen bets on a rate cut by September, currently seen as a 70% probability. Political events, including the first U.S. presidential debate and the initial round of the French election, could also impact market sentiment. Federal Reserve officials are slated to speak throughout the week, providing further guidance on monetary policy. Despite a slight dip, the dollar’s strength is likely to persist, with defensive positioning expected ahead of these political milestones.

Forecast: Dollar to Stay Strong

The dollar is poised to remain robust, driven by continued economic data supporting a potential rate cut and geopolitical uncertainties favoring safe-haven demand. This bullish outlook suggests the dollar index could end the week higher, maintaining its strong performance. Traders will be closely watching the PCE data and Fed commentary for any signs of shifts in monetary policy that could further influence the dollar’s direction.

Technical Analysis

The US Dollar Index is weaker on Monday but remains on the strong side of both the 50-day moving average at 105.190 and the 200-day moving average at 104.485. This is telling us that the intermediate and long-term trends are up.

With both major trends up, buyers are likely to come in on the first test of support, which is 105.190. If this move generates enough upside momentum then look for a breakout above 105.915.

A failure to hold this level won’t do significant damage to the chart and could actually lead to a rangebound trade with 104.485 support.