- The US Dollar dips slightly at the week's start as markets focus on the upcoming Trump-Putin meeting on Tuesday.
- US bond markets brace for movement ahead of the Federal Reserve meeting on Wednesday.
- The US Dollar Index remains range-bound following Monday's US Retail Sales data.
The US Dollar Index (DXY), which measures the USD’s performance against six major currencies, faces potential volatility this week amid key geopolitical events and the Federal Reserve’s (Fed) policy decision. As of Monday, the DXY edges lower, trading near 103.60 following the release of US Retail Sales data for February.
On the geopolitical front, markets are closely watching Tuesday’s high-stakes meeting between US President Donald Trump and Russian President Vladimir Putin. According to a Bloomberg report, President Trump stated on Air Force One that discussions will focus on territorial divisions and asset allocations.
In Europe, political developments in Germany could also impact markets, with a crucial vote on a €1 trillion spending package set for Tuesday. The plan aims to boost Europe’s defense industry, with broader economic implications. If the Greens support the proposal, it could secure the two-thirds majority needed for approval in the German Bundestag.
Meanwhile, attention shifts to the Federal Reserve’s policy meeting on Wednesday. The Federal Open Market Committee (FOMC) will release its latest economic projections, outlining expectations for interest rates in the short and medium term. Ahead of Fed Chair Jerome Powell’s speech, the latest US Retail Sales data showed a sharp downward revision for February, with current figures remaining flat.
Daily Market Movers: Retail Sales Show Consumer Fatigue
- President Trump confirmed plans to speak with Russian President Vladimir Putin on Tuesday as the US pushes for an end to the conflict in Ukraine, Bloomberg reports. During a flight on Air Force One on Sunday, Trump stated that the discussion will focus on territorial divisions and asset allocations, adding that there is “a very good chance” of reaching a deal.
- At 12:30 GMT, US Retail Sales data for February was released:
- Monthly sales rose just 0.2%, falling short of the expected 0.7% increase after January’s -0.9% decline.
- January’s figure was revised further down to -1.2% from -0.9%, deepening concerns.
- The annual growth rate dropped from 4.2% to 3.1%, with the previous reading revised lower to 3.9%.
- Meanwhile, the NY Empire State Manufacturing Index for March plummeted, contracting by 20, far worse than the expected -1.9, after posting a positive 5.7 in February.
- Equities are showing little enthusiasm. US futures remain in the red, while European markets are seeing modest gains.
- The CME FedWatch Tool indicates a 99.0% probability that the Federal Reserve will hold rates steady in Wednesday’s meeting. The likelihood of a rate cut at the May 7 meeting currently stands at 27.5%.
- The US 10-year Treasury yield hovers around 4.30%, rebounding from its near five-month low of 4.10% recorded on March 4.
US Dollar Index Technical Analysis: Rangebound but Poised for a Breakout
The US Dollar Index (DXY) remains confined within a 103.18–103.99 range, but with key geopolitical events and the Federal Reserve's decision on the horizon, a breakout appears inevitable. Traders should be wary of false breaks and focus on well-defined technical levels, such as 105.00 on the upside and 101.90 on the downside.
- Upside Scenario:
A rejection at 104.00 could trigger further downside pressure. However, if bulls manage to clear this level, a sharp rally toward the 105.00 mark is likely, coinciding with the 200-day Simple Moving Average (SMA) at 105.01. Beyond this zone, resistance levels at 105.53 and 105.89 could act as barriers to further gains.
- Downside Scenario:
A drop below the 103.00 psychological level may indicate renewed bearish momentum, particularly if US bond yields decline. In an extended sell-off, the 101.90 support could come into play if long-term USD holders further unwind their positions.
