US Dollar Index: DXY renews 15-month low beneath 100.00 even as markets reassess Fed bias

• US Dollar Index drops to the lowest level since April 2022, extending six-day losing streak.
• Hawkish comments from Fed’s Waller, cautious mood ahead of US consumer-centric data prod DXY bears at multi-month low.
• Risk catalysts, University of Michigan data eyed for clear directions as softer inflation teases Fed policy pivot.

US Dollar Index (DXY) declines to the lowest level since April 2022, around 99.70 during early Friday, even as markets seek fresh clues to extend the greenback’s previous bloodbath. That said, the latest comments from a Federal Reserve (Fed) official join a cautious mood ahead of the mid-tier US data to prod the DXY bears. However, fears of the Fed’s policy pivot, mainly due to the early week’s downbeat US inflation clues, weigh on the US Dollar Index.

Recently, Federal Reserve Governor Christopher Waller said, “Fed likely to need two more 25 basis point rate hikes this year.” The policymaker also ruled out concerns about the Fed rate peak while stating the need for two more downbeat inflation numbers in the prepared remarks for delivery before a gathering held by The Money Marketeers of New York University shared by Reuters.

Apart from Fed’s Waller, a pause in the US Treasury bond yields after refreshing the two-week low also prod the DXY bears even if they recently refreshed the multi-month low. That said, the US 10-year and two-year Treasury bond yields print mild gains around 3.78% and 4.65% by the press time.

Even so, downbeat US inflation clues keep flagging fears of the Fed’s policy pivot after July’s already priced-in rate hike and exert downside pressure on the US Dollar Index. That said, US Producer Price Index (PPI) came in as 0.1% YoY for June, versus 0.4% expected and 0.9% prior while the PPI ex Food & Energy, also known as the Core PPI, eased to 2.4% YoY from 2.8% previous reading and 2.6% market forecasts. Earlier in the week, the US Consumer Price Index (CPI) registered a 3.0% YoY figure for June versus 3.1% market forecasts and 4.0% reported for May. Further details suggest that the CPI ex Food & Energy, also known as the Core CPI, softened to 4.8% yearly for the said month compared to analysts’ estimations of 5.0% and 5.3% previous readings.

Elsewhere, chatters that China will need more investment, circulated by Japan’s Nikkei news, prod the sentiment and put a floor under the US Dollar Index.

Amid these plays, the S&P500 Futures retreat from the yearly high, down 0.16% intraday at the latest, whereas the commodities remain firmer but with cautious moves.

Looking ahead, the preliminary readings of July’s Michigan Consumer Sentiment Index, as well as the Five-Year Consumer Inflation Expectations, will be eyed for clear directions. Should the final clues of the US inflation appear downbeat, the DXY may easily aim for the 99.40-35 support zone.

Technical analysis

A clear downside break of the April 2023 bottom surrounding 100.80, as well as the 100.00 psychological magnet, keeps the US Dollar Index bears hopeful even as multiple tops marked during March 2022 prods immediate DXY downside 99.40-35 amid oversold RSI.