US Dollar Index: DXY retreats towards 104.00 as markets brace for Fed’s preferred inflation, US NFP

• US Dollar Index eases around multi-day top, prints the first daily loss in three, amid market’s consolidation.
• China headlines, cautious mood ahead of US Core PCE Price Index, NFP also prod DXY bulls.
• Fed Chair Powell’s speech keeps Greenback buyers hopeful but further rate hikes hinge on data.

US Dollar Index (DXY) takes offers to refresh its intraday low near 104.10 as it retreats from the highest level since June 01, marked the previous day, amid the market’s cautious optimism. That said, China's stimulus joins the anxiety ahead of this week’s top-tier inflation and employment data from the US to underpin the pullback moves of the Greenback’s gauge versus the six major currencies. However, hawkish remarks from Fed Chair Jerome Powell and a technical breakout keep the DXY bulls hopeful.

Fed’s Powell reiterated his defense for “higher for longer” rates while stating that the policy is restrictive but the Fed can’t be certain what neutral rate level is. The policymaker also added that there is substantial further ground to cover to get back to price stability while also stating that the economic uncertainty calls for agile monetary policy-making.

Further, President of the Federal Reserve Bank of Cleveland Loretta J. Mester also appeared hawkish while warning that the under-tightening would be worse than overtightening. The policymaker also added, “We are getting close to where we need to be with rates.”

Additionally, Federal Reserve Bank of Philadelphia President Patrick Harker told Bloomberg that he doesn't see the need now for additional rate increases but added that he could call for more hikes if inflation retreat stalled.

It’s worth noting that the softer prints of the US Purchasing Managers Index and Michigan Consumer Sentiment Index contrasted with mixed details of Durable Goods Orders, mid-tier activity data and inflation expectations. However, hawkish comments from Federal Reserve (Fed) Chairman Jerome Powell at the annual Jackson Hole Symposium helped the US Dollar Index (DXY) to post the fifth consecutive weekly gain while poking the three-month high.

On a different page, China’s halving of the stamp duty on stock trade joins hopes of witnessing no major negatives from the US-China trade talks and China Premier Xi Jinping’s dislike for the Western-style growth measures seems to underpin recovery in sentiment and weigh on the DXY.

Amid these plays, the benchmark 10-year Treasury bond yields snapped the four-week uptrend by posting minor weekly losses as it retreated from the highest level since 2007, before posting a corrective bounce to 4.25% at the latest. It should be noted that Wall Street closed positive the previous day but S&P500 Futures struggle for clear directions.

Moving on, the Federal Reserve’s (Fed) favorite inflation gauge, namely the Core Personal Consumption Expenditure (PCE) Price Index for July, and the monthly employment data, will be crucial for clear directions of the US Dollar Index.

Technical analysis

Despite the latest pullback from a nearly three-month high, the US Dollar Index (DXY) bulls remain hopeful unless they witness a daily closing beneath the previous resistance line stretched from early March, close to 103.30 by the press time.