US Dollar Index News: DXY Gains Momentum as Euro and Pound Stumble

Highlights

• DXY surges as Europe and UK data falter.
• Eurozone PMI falls; ECB rethinks tightening?
• Pound weakens, echoing euro’s downturn.
• All eyes on Powell’s Jackson Hole talk.

U.S. Dollar Index on the Rise Amid Weak European Data

The U.S. Dollar Index (DXY) soared to its highest in two months, driven by bleak business activity statistics from Europe and the UK, causing significant slips in the euro and pound. These downturns have propelled the greenback to a commanding position, especially with anticipation building around Federal Reserve Chair Jerome Powell’s imminent speech at the Jackson Hole Symposium. The DXY, predominantly influenced by the euro, touched 103.95, marking its apex since June 8 and indicating a possible end to its recent two-month slump.

Eurozone PMI Declines, Casting Shadows on the ECB’s Tightening Plans

S&P Global’s HCOB flash Composite PMI for the euro area witnessed a sharp drop to 47.0 from July’s 48.6, reaching its lowest since November 2020. Particularly, the German composite slumped to its nadir since May 2020 due to manufacturing outputs plummeting and services activity contracting. This decline, coupled with the possibility of slowing inflation, hints at the European Central Bank possibly reconsidering its tightening stance in September.

Pound’s Stumble Mirrors Euro’s Woes

Like the euro, the pound also staggered, dipping to its weakest in over a week after the S&P Global/CIPS PMI slouched to 47.9 in August. This decline, its lowest since January 2021, combined with easing price and cost pressures, prompts the Bank of England to rethink its impending interest rate decisions.

Yen’s Uncertain Path Amid Intervention Speculations

The yen’s recent strengthening has ignited speculations around Tokyo’s potential market interventions, especially as it approaches last year’s milestone against the dollar. Yet, many believe the Japan Ministry of Finance might hold off until the pair nears 155.

U.S. Stands Strong, but Rate Hike Expectations Persist

Contrasting with Europe, the U.S. economy remains resilient, with recent robust data dispelling recession fears. However, with inflation persistently above the Fed’s 2% target, there’s anticipation that rates might hover higher for an extended period. Market predictions are tilting towards a probable Fed rate hike by year-end.

Short-Term Bullish Forecast for the U.S. Dollar

The U.S. Dollar Index (DXY) is poised for a bullish trajectory in the short-term, buoyed by underwhelming business activity data from the euro area and the UK.

The recent ascent of the greenback, touching its highest in two months, coupled with anticipation surrounding Federal Reserve Chair Jerome Powell’s insights at the Jackson Hole Symposium, reinforces this optimistic outlook.

With the euro and pound showing signs of vulnerability and the U.S. economy displaying robust resilience despite global challenges, the DXY may continue to benefit from these dynamics. The imminent policy decisions by major central banks, especially the Fed’s stance on interest rates, are likely to further amplify the dollar’s ascendancy in the coming weeks.

Technical Analysis

The US Dollar Index currently stands at 103.927, marginally above the previous 4-hour price of 103.925. Relative to the 200-4H moving average at 101.882, the index has been trending upwards, and with its current positioning above the 50-4H moving average of 103.291, bullish momentum is evident. The 14-4H RSI is recorded at 68.34, hovering just below the overbought threshold, indicating a strong buying interest.

Furthermore, the market is trading comfortably above the main support area of 101.967-101.742 but is yet to reach the main resistance region of 104.299-104.403. Overall, the current market sentiment appears bullish.