US Dollar Index rebound seeks acceptance near 104.50, focus on inflation, recession

• DXY struggles to extend the first daily gains in four amid market’s inactions.
• Fears of economic slowdown tighten the grip over risk appetite.
• Fed’s Powell, downbeat US PMIs add to the sour sentiment but Wall Street closed positive on softer yields.
• Yields rebound, stock futures print mild losses as traders await more clues.

US Dollar Index (DXY) seesaws around 104.40, after snapping the three-day downtrend, on Friday’s Asian session. The greenback gauge cheered the market’s risk-off mood the previous day while ignoring downbeat US data and mildly hawkish comments from the Fed Chair Jerome Powell.

In his testimony before the House Financial Services Committee on Monetary Policy, Fed’s Powell cited inflation and recession woes as the challenges to ensure a smooth landing, despite expecting firmer growth this year, during his second round of Testimony. The central banker’s concern for recession joined downbeat US data to favor the risk-off mood.

It’s worth noting that downbeat US PMIs also added to the risk-aversion and fuelled the US dollar’s safe-haven demand. S&P Global Services PMI for the US slumped to 51.6 in June from 53.4 prior, not to forget missing the 53.5 forecasts. Further, the Manufacturing PMI not only missed the market expectation of 56 by a wide margin in June, to 52.4 versus 57.00 prior, but also slumped to a nearly two-year low.

Despite the market’s pessimism, the Wall Street benchmarks closed positively due to the downbeat Treasury yields. However, the S&P 500 Futures drop 0.30% while the US 10-year Treasury yields remain unchanged at around 3.09% after dropping to a fortnight low the previous day.

Looking forward, a light calendar may test the US dollar bulls but risk catalysts and the second-tier US data for housing and activities may offer intermediate moves.

Technical anlaysis

DXY portrays a bullish pennant chart pattern, with the latest range between 104.10 and 104.60. That said, the bullish MACD signals and RSI conditions also keep buyers hopeful.