US Dollar Index bulls take a breather as Fed’s preferred inflation, US Durable Goods Orders loom

• US Dollar Index stays pressured around intraday low, snaps two-day uptrend.
• Sluggish Treasury yields, inactive Asian session allows sellers to sneak in ahead of the key data.
• Upward revision to US GDP, President Biden’s comments renew hawkish Fed bets.
• US Core PCE Price Index, Durable Goods Orders for November eyed for clear directions.

US Dollar Index (DXY) remains on the back foot near 104.35 as bulls retreat during early Friday after a two-day winning streak. In doing so, the greenback’s gauge versus the six major currencies portrays the consolidation ahead of the key US data.

In addition to the pre-data anxiety, sluggish US Treasury yields also allow the DXY bulls to take a breather. That said, the US 10-year Treasury yields remain sidelined around the monthly high after recalling the bulls, making rounds to 3.68% by the press time.

Even so, the US Senate’s passage of a $1.7 trillion government funding bill and the latest comments from US President Joe Biden showing readiness to tame inflation keeps DXY bulls hopeful.

That said, the US Dollar Index cheered strong prints of the US economic growth and personal consumption the previous day. US data renewed hawkish expectations from the US Federal Reserve and propelled the US Dollar. To talk about the statistics, the US economy expanded at an annualized rate of 3.2% in the third quarter (Q3), per the final readings of the Gross Domestic Product (GDP), versus 2.9% previous estimates. Further, the Personal Consumption Expenditure (PCE) Prices match 4.3% QoQ estimations during Q3 2022 whereas the Core PCE improved to 4.7% QoQ versus 4.6% market forecasts.

It’s worth noting that the sentiment-positive headlines from China and mixed US data, as well as the Bank of Japan’s (BOJ) moves, previously exerted downside pressure on the DXY.

Amid these plays, S&P 500 Futures print mild losses while tracking the Wall Street benchmarks amid a sluggish Asian session.

Looking forward, the market’s cautious mood may restrict immediate DXY moves ahead of the US Core Personal Consumption Expenditure (PCE) - Price Index, the Federal Reserve’s preferred inflation gauge, as well as Durable Goods Orders, for November.

Forecasts suggest that the US Core PCE Price Index remains unchanged at 0.2% MoM. However, the Annualized forecasts suggest softer figures of 4.7% YoY versus 5.0% previous readings. Further, US Durable Goods Orders could register a contraction of 0.6% in November compared to the previous increase of 1.1% (revised from 1.0%).

Technical analysis

US Dollar Index recovery remains elusive unless the quote remains below a one-month-old descending resistance line, around 104.95 by the press time.