US Dollar Index: DXY steadies after the biggest daily fall in six weeks, US statistics eyed

• US Dollar Index licks its wounds at weekly low after falling the most in 1.5 months the previous day.
• Downbeat US data pushed back Fed hawks and drowned Treasury bond yields, Greenback.
• US ADP Employment Change, PCE and Q2 GDP eyed for confirmations of no Fed rate hikes in 2023.

US Dollar Index (DXY) bears take a breather at the weekly low, making rounds to 103.50 by the press time, as markets await more clues to confirm the recent dovish bias about the Federal Reserve (Fed) due to the downbeat US data. That said, the Greenback’s gauge versus the six major currencies dropped the most in six weeks the previous day before stabilizing during Wednesday’s Asian session.

On Tuesday, the US Conference Board's (CB) Consumer Confidence Index slumped to 106.10 for August from a downwardly revised 114.00 prior (from 117.0), versus 116.0 market forecasts. That said, the US JOLTS Job Openings slumped to the lowest since March 2021, to 8.827M for July versus 9.465M expected and 9.165M prior (revised from 9.582). Additionally, the US Housing Price Index eased to 0.3% MoM for June from 0.7% prior and 0.2% while the S&P/Case-Shiller Home Price Indices improved to -1.2% YoY from -1.7% previous readings and -1.3% market forecasts.

It should be noted that Fed Chair Jerome Powell’s speech highlighted the data dependency for future moves, which in turn challenged the hawks after the disappointing US statistics.

Following the data, the CME’s FedWatch Tool signaled a 16% chance of a rate hike versus 20% prior. The same propelled Wall Street benchmarks and weighed on the US Treasury bond yields, as well as the US Dollar. That said, the Wall Street benchmarks rose for the third consecutive day while the US 10-year Treasury bond yields dropped to the lowest level in 13 days by the end of Tuesday’s North American trading session.

Not only the downbeat US statistics but the hopes of witnessing more stimulus from China and upbeat performances of the equities also weighed on the US Dollar Index (DXY). chatters about the early rate cuts from the People’s Bank of China (PBoC) and a cut into the mortgage rates from the Dragon Nation also helped the traders to remain hopeful.

Alternatively, US Commerce Secretary Gina Raimondo’s complaints about the hardships for the US firms in China prod the DXY bears. On the same line could be the International Monetary Fund’s (IMF) readiness to be more cautious while allocating the Special Drawing Rights (SDRs) in the future, due to the current environment of higher interest rates and inflation.

Looking forward, more clues of witnessing the Fed’s policy pivot in 2023 will be eyed and can weigh on the US Dollar Index. That said, today’s US ADP Employment Change, the final readings of the US second quarter (Q2) Gross Domestic Product (GDP) and the Personal Consumption Expenditure (PCE) are the key to watch.

Technical analysis

A daily closing below the six-week-old rising support line, now immediate resistance around 103.95, directs the US Dollar Index (DXY) bears toward the 200-DMA support of near 103.10.