US dollar bulls firm in bullish territory

• US dollar holds in the bullish territory following a mixed US session. 
• US data will be important for the remainder of the week, PCE eyed. 

The US dollar was higher on Wednesday following the Federal Reserve Chairman Jerome Powell explaining that there is a risk the US central bank's interest rate hikes will slow the economy too much. 

US stocks were jittery due to the concerns about the economy and on the back of data that showed the US economy shrank more than previously estimated. The Dow Jones Industrial Average rose 0.3% to 31,029.31, while the S&P 500 fell 0.1% at 3,818.83 and the Nasdaq Composite ended in the red also to11,177.89.  The US 10-year yield sank 10.5 basis points to 3.10% as inflation worries hounded investors.

The dollar index (DXY), which measures the greenback against six counterparts, rallied to a high of 105.149 from a low of 104.356 as investors sought safety in US assets as stocks declined globally due to the mounting risk of a recession. Nevertheless, the US dollar index stayed below the two-decade high of 105.79 pinged two weeks ago.

Looking ahead, data will be key and analysts at Westpac explained, ''weakness in personal income is raising concerns over purchasing power as households run down savings for personal spending.''

''Although PCE inflation looks to have crested, price pressures will only slowly abate through 2022. Initial jobless claims are set to remain at a low level and concerns around supply issues will remain prominent in June’s Chicago PMI.''

Meanwhile, from a positioning standpoint, speculators’ net long USD index positions ticked a little higher having surged to their highest levels since March 2017 the previous week as the market prepared for this month’s 75 bp rate hike from the Fed. 

''Speculation is beginning to emerge that the market may have over-estimated the extent to which the Fed may have to hike rates. This could soften net USD positions in forthcoming data,'' analysts at Rabobank argued.