US Dollar Index clings to mild losses above 104.00 ahead of US PMIs

• US Dollar Index pares the biggest daily gain in 10 weeks amid sluggish session.
• Mixed US statistics, Fed’s hesitance in praising hawks keep sellers hopeful.
• Recession woes and Sino-American tensions keep buyers hopeful ahead of December PMIs.

US Dollar Index (DXY) makes rounds to 104.30-40 as it prints mild losses heading into Friday’s European session. In doing so, the greenback’s gauge versus the six major currencies consolidates the biggest daily gain since early November, marked the previous day.

The DXY’s failure to defend the previous day’s rebound from a six-month low could be linked to recently mixed data in the US and a lack of a major catalyst during early Friday. It’s worth noting that the US Retail Sales flashed -0.6% MoM figure in November versus 0.1% expected and 1.3% prior. Further, manufacturing survey details from Philadelphia Fed and New York Fed came in disappointing for the said month whereas Industrial Production eased in November and the Jobless Claims also dropped for the week ended on December 09.

It’s worth noting that the market sentiment remains dicey as recession woes underpin the Treasury bond yields but the US stock futures and equities in the Asia-Pacific region remain lackluster ahead of the final shot of data from the big week. The reason for the lack of negative performances of equities could be linked to the hopes for more stimulus from China. With the mixed signals, the US Dollar Index fails to extend the previous day’s recovery moves.

On Thursday, the global central bankers’ rush towards higher rates and readiness to keep them high for longer, to battle the inflation woes, seemed to have triggered the risk-off mood and underpinned the US Dollar demand. On the same line could be the latest Sino-American tussles as Reuters reported that the Biden administration on Thursday added Chinese memory chipmaker YMTC and 21 "major" Chinese players in the artificial intelligence chip sector to a trade blacklist, broadening its crackdown on China's chip industry.

Moving on, the market forecasts surrounding the US S&P Global PMIs appear mixed as Services activities are likely to improve but not the manufacturing ones. Even so, both these sectors are expected to print the below 50 figure that suggests a contraction in activities and could weigh on the US Dollar in case of a downbeat outcome. It should be noted, however, that the US Federal Reserve’s (Fed) hesitance in favoring the hawks, despite raising rates by 50 basis points (bps), seems to challenge the DXY bulls.

Technical analysis

US Dollar Index losses could be linked to the failure to cross a one-week-old descending resistance line, around 104.55 by the press time. However, RSI (14) stays near the oversold conditions and hence challenges the odds favoring major declines.