US Dollar Index: DXY fades recovery from 15-month low near 100.00 on Fed concerns, upbeat sentiment

• US Dollar Index retreats from intraday high, reverses corrective bounce off the lowest level since April 2022.
• Upbeat details of US Retail Sales growth put a floor under DXY at multi-month low.
• Chatters about Fed’s July rate hike be the last, risk-on mood exert downside pressure on greenback.

US Dollar Index (DXY) struggles to defend the previous day’s corrective bounce off a multi-month low, retreating from an intraday high to 99.93 amid the early hours of Wednesday’s Asian session.

That said, the welcome prints of the US Core Retail Sales for June underpinned the DXY’s recovery from the lowest level since April 2022. However, the risk-on mood and chatters about the US Federal Reserve’s (Fed) policy pivot prod the US Dollar bulls amid an absence of major data/events.

As per the latest Reuters poll of around 109 economists, the Fed’s widely anticipated 25 basis points (bps) rate hike in July will be the last increase of the current tightening cycle.

Also read: Fed's last rate hike coming at July meeting – Reuters poll

It should be noted that the risk appetite improves on the positive performance of the US banks, as well as the risk-positive headlines surrounding China, which in turn allowed the Wall Street benchmarks to refresh the yearly top. It’s worth noting, however, that the benchmark US 10-year Treasury bond yields remain pressured around 3.78% while the two-year counterpart edges higher near 4.76% at the latest.

Talking about the US data, the Retail Sales growth for June came in as 0.2% MoM versus 0.5% expected and prior (revised). However, the Retail Sales Control Group marked 0.6% growth versus market forecasts of -0.3% and 0.3% previous readings. It should be noted that the US Industrial Production reprinted -0.5% for June compared to analysts’ estimations of 0.0%.

Looking ahead, a light calendar may restrict intraday moves of the US Dollar Index and can trigger the DXY pullback towards the multi-month low of 99.56 marked the previous day. As a result, the risk catalysts are important to watch for short-term directions.

Technical analysis

Oversold RSI (14) joins multiple tops marked during early 2022 to restrict the short-term US Dollar Index (DXY) downside near 99.40-35. The corrective bounce, however, appears elusive unless crossing April’s low of around 100.80.