US Dollar Index retreats to 102.00 as Fed Minutes favor cautious optimism, US data eyed

• DXY fades bounce off monthly low, pressured around daily bottom of late.
• FOMC Minutes raised doubts on rate hikes after September, marked upside risks to inflation.
• Headlines from China, Ukraine test sentiment but US stock futures, Treasury yields print mild gains.
• Second readings of US Q1 GDP, Weekly Jobless Claims and PCE data will be important for fresh impulse.

US Dollar Index (DXY) remains depressed at around 102.00, reversing the previous day’s corrective pullback from the monthly low, as traders struggle for fresh during the aftermath of the Federal Open Market Committee (FOMC) Minutes. In doing so, the quote takes clues from firmer risk appetite amid lackluster markets.

While portraying the mood, the S&P 500 Futures print mild gains around 3,980 whereas the US 10-year Treasury yields again bounce off monthly low, after Wednesday’s failed attempt, up 2.5 basis points (bps) to 2.77% at the latest.

The latest Federal Open Market Committee (FOMC) Minutes endorsed the idea of 50 basis points (bps) rate hikes for only the next couple of meetings, raising doubts on the rate-lift trajectory past September. The Minutes rather highlighted inflation concerns and mentioned, “It would be appropriate to consider sales of mortgage-backed securities.”

Wall Street posted the biggest daily gains in a week following the event, which in turn drowned the DXY.

Other than the Fed Minutes, downbeat prints of the Durable Goods Orders for April also weighed on the US Dollar. As per the latest US Durable Goods Orders, the growth slowed down to 0.4% MoM versus market forecasts and revised down prior readings of 0.6%. Also, the Core Durable Goods Orders rose 0.3% MoM versus 0.6% expected and 1.1% prior (revised).

Alternatively, the latest headlines from China and Ukraine seem to challenge the market sentiment and keep the greenback on the bull’s radar. That said, “Ukrainian President Volodymyr Zelensky on Wednesday savaged suggestions that Kyiv gives up territory and make concessions to end the war with Russia, saying the idea smacked of attempts to appease Nazi Germany in 1938,” per Reuters. On the same line, China criticizes the US Draft Security Council resolution on North Korea and adds to the recently alive Sino-American tensions.

Looking forward, an off in Europe mat restrict market moves and let the post-FOMC Minutes move to extend. However, the second-tier US data, like preliminary GDP for Q1 2022 and Personal Consumption Expenditure (PCE) details for April, may entertain traders.

Technical analysis

Failures to cross a two-week-old descending trend line, around 102.71 by the press time, redirects the US Dollar Index towards a 61.8% Fibonacci retracement of mid-April to early May’s upside, near 101.65.