- The US Dollar struggles to recover losses against most major peers on Wednesday.
- Mixed economic data sees upbeat ADP and S&P Global PMI figures offset by weaker ISM data.
- The US Dollar Index (DXY) tests key support at 107.35 but manages to hold steady throughout the day.
The US Dollar Index (DXY), which tracks the Greenback's performance against six major currencies, hovers near key support in a weak trading session on Wednesday. Investors anticipate the release of the U.S. Purchasing Managers' Index (PMI) reports from both S&P Global and the Institute for Supply Management (ISM).
Market sentiment has improved as concerns over U.S. President Donald Trump's tariffs ease, following the temporary suspension of levies on Mexico and Canada. Meanwhile, liquidity rises as Chinese traders return after the Chinese New Year, contributing to increased market activity.
Daily Digest: Mixed Economic Signals
- Stronger-than-expected U.S. labor market data: The ADP Employment Change report showed a jump in private-sector hiring, with 183,000 new jobs in January, surpassing the 150,000 forecast and the revised 122,000 from the previous report.
- S&P Global PMI Revisions: Final January figures showed a slight improvement, with Services PMI at 52.9 (versus 52.8 expected) and Composite PMI at 52.7 (up from the previous 52.4).
- Disappointing ISM Services Data:
- Services PMI dropped to 52.8, missing the estimated 54.3 and down from December’s 54.1.
- The Prices Paid component fell to 60.4 from 64.4 in the prior release, indicating softer inflationary pressures.
- Federal Reserve Officials Speak:
- At 18:00 GMT, Chicago Fed President Austan Goolsbee will discuss the economy at the Chicago Fed’s 31st Annual Automotive Insights Symposium in Detroit.
- At 20:00 GMT, Fed Governor Michelle Bowman will give a speech on the economic outlook and banking regulations at the 2025 Kansas Bankers Association conference.
Market Overview:
- U.S. equities are slightly in the red, with the Nasdaq recovering from earlier losses of nearly 1%.
- The CME FedWatch tool indicates an 83.5% probability that the Federal Reserve will maintain interest rates at their current levels in the March 19 meeting.
- The U.S. 10-year Treasury yield hovers around 4.42%, bouncing off its fresh yearly low of 4.408%.
- Gold continues to rally, hitting another all-time high above $2,875 as investors seek safety in bullion.
US Dollar Index Technical Analysis: Bearish Pressure Intensifies
The US Dollar Index (DXY) extends its correction lower as investors shift towards safe-haven assets like Gold and the Swiss Franc (CHF). The Greenback struggles to maintain strength, as the risk premium gained earlier in the week from U.S. trade tariffs begins to fade.
Key Levels to Watch:
- Upside Resistance: The 109.30 level (July 14, 2022 high) was briefly surpassed on Monday but failed to hold. A sustained break above this level could open the door for a move toward 110.79 (September 7, 2022 high).
- Downside Support: The October 3, 2023 high at 107.35 is currently providing support. However, if selling pressure continues, the next downside targets are 106.52 and 105.89.
With the Relative Strength Index (RSI) still showing room for further downside, the DXY may face additional pressure in the near term.
