- The US Dollar recovered against most major G10 peers on Thursday as President Trump shifted his focus from the Fed to the US 10-year yield.
- The US Dollar Index (DXY) popped above 108.00, though it still faces a long road to reclaim 109.00.
The US Dollar Index (DXY), which tracks the performance of the US Dollar against six major currencies, is locking in gains this Thursday just ahead of the United States trading session. The improvement comes on the back of comments by US President Donald Trump - who signaled intentions to take over Gaza and pursue a nuclear deal with Iran - as well as hints that a plan to end the war in Ukraine might be unveiled by the Trump administration either this week or next.
On the economic front, remarks from US Treasury Secretary Scott Bessent have added support to US yields. Bessent clarified that the Trump administration is focused on reducing 10-year Treasury yields rather than targeting the Federal Reserve's (Fed) benchmark short-term rate. Today, all eyes are on the upcoming weekly US Jobless Claims data, with Friday's Nonfarm Payrolls report also on the horizon.
Daily Digest Market Movers: Softer Data and Key Speeches
- BoE Monetary Policy Decision: The Bank of England (BoE) announced a 25-basis point (bps) rate cut to 4.50%, with a vote split of 7 in favor of a 25-bps cut against 2 votes for a larger 50-bps reduction.
- US Job Cuts: The US Challenger Job Cuts for January have increased to 49,795 layoffs from a previous figure of 38,792.
- Jobless Claims Data: For the week ending January 31, initial jobless claims came in at 219,000, beating expectations of 213,000 and rising from 207,000 last week, while continuing claims climbed to 1.886 million, topping both the forecast of 1.87 million and last week’s 1.858 million.
Key Fed Speeches:
- At 19:30 GMT, Federal Reserve Governor Christopher Waller will join a discussion on future payments at the GeoEconomics Center, hosted by the Atlantic Council in Washington D.C.
- San Francisco Fed President Mary Daly is scheduled to speak at 20:30 GMT.
- At 22:10 GMT, Dallas Fed President Lorie Logan will participate in a panel titled "Future Challenges for Monetary Policy in the America" during an event in Mexico City.
- Global Equities: Soothing comments from President Trump have allowed equities to catch their breath, with markets in China, Europe, and US futures trading in positive territory.
- Fed Expectations: The CME FedWatch tool now projects an 85.5% chance that the Fed will hold interest rates steady at its next meeting on March 19.
- US Treasury Yields: The US 10-year yield is trading around 4.42%, bouncing back from a recent yearly low of 4.40% recorded on Wednesday.
US Dollar Index Technical Analysis: Gaining Momentum
The US Dollar Index (DXY) appears to be catching a breath of relief after bouncing off key technical levels in several major crosses. Comments by President Trump and Treasury Secretary Bessent helped spark a turnaround after a three-day decline. However, pressure is expected to build again as the Nonfarm Payrolls report for January approaches.
Resistance Levels:
- The first hurdle is at 109.30, a level touched briefly on Monday - this corresponds to the July 14, 2022 high and a rising trendline.
- Beyond that, the next resistance sits at 110.79, which is based on the high from September 7, 2022.
Support Levels:
- On the downside, the October 3, 2023 high of 107.35 has held firm against selling pressure.
- The Relative Strength Index (RSI) suggests there is still room to drop further, with potential support levels around 106.52 (an April 16, 2024 high) or even 105.90, which aligns with the resistance observed in June 2024 and the 100-day Simple Moving Average.
Overall, the US Dollar continues to show resilience, even as market participants await critical economic data and policy signals that could steer its next moves.
