US Dollar Index (DXY) News: Bullish Momentum as Treasury Yields Surge on Strong Retail Data

U.S. Dollar Rises as Treasury Yields Surge on Strong Retail Sales Data

The U.S. Dollar Index (DXY) surged on Thursday, bolstered by a sharp rise in Treasury yields following unexpectedly strong retail sales data for July. The robust economic indicators have calmed concerns about an impending economic slowdown, boosting investor confidence in the U.S. economy.

At 13:22 GMT, the DXY is trading 103.116, up 0.547 or +0.53%.

Treasury Yields Jump on Strong Economic Data

U.S. Treasury yields spiked after the release of July retail sales data, which showed a 1% increase, significantly outpacing the 0.3% growth forecast by economists polled by Dow Jones. The yield on the 10-year Treasury note rose by over 8 basis points to 3.909%, while the 2-year Treasury yield jumped more than 10 basis points to 4.057%. The stronger-than-expected retail sales numbers suggest that consumer spending remains resilient, alleviating fears of a recession or a significant economic slowdown.

Earlier concerns about the economy’s direction were heightened after weaker-than-expected nonfarm payrolls data for July. However, the latest initial jobless claims figures, which came in lower than anticipated, further reinforced the view of firm labor demand, providing additional support for the U.S. Dollar.

Inflation Data Supports Fed’s Position

The latest inflation data has also played a role in shaping market sentiment. The consumer price index (CPI) for July increased by 0.2% month-over-month and 2.9% year-over-year, slightly below the expected annual increase of 3%. Core CPI, which excludes food and energy prices, rose 3.2% year-over-year, matching expectations. These inflation readings suggest that the Federal Reserve’s efforts to contain rising prices have been largely successful, reducing the urgency for further aggressive rate hikes.

Market Forecast: Bullish Outlook for the U.S. Dollar

The combination of strong retail sales, stable inflation, and rising Treasury yields points to continued strength in the U.S. Dollar in the short term. Traders can expect the DXY to maintain its upward momentum as economic data continues to support the view of a resilient U.S. economy. However, the performance of gold remains under pressure, with the precious metal poised for further declines if key support levels fail, potentially driving it lower by $50 to $100.

Technical Analysis

The DXY is trading higher on Thursday, nearly reversing all off this week’s losses. The current upside momentum suggests traders may take a run at the pivot at 103.480. Since the main trend is down, sellers are likely to show up on the first test of this level.

Overtaking 103.480 will signal the return of buyers, while a breakout over 103.456 could lead to a near-term test of the 200-day moving average at 104.223.