The US Dollar (USD) adds gains, which probably will be used by US Dollar bulls as a buffer ahead of the data points later this week, in an attempt to defend that 104.00 level in the US Dollar Index (DXY). Markets are not really seeing a main driver for the turnaround, so this move should be taken with a pinch of salt. This could result in the Greenback trading in a tight range until the release of important economic data later this week, namely the US Gross Domestic Product (GDP) on Thursday and the Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred inflation gauge, on Friday.
A very light US calendar is ahead on Wednesday, with only the Mortgage Bankers Association delivering its weekly Mortgage Applications for this week. Markets will be able to hear from a Fed official as Fed Board Member Christopher Waller will deliver a speech about the US Economic Outlook at the Economic Club of New York. Known for being a hawk, any change in the number of interest-rate cuts or timing could be important for the Greenback’s valuation.
This Friday is an official bank holiday (Good Friday) with a lot of trading desks closed. Though the Personal Consumption Expenditures elements will be released in thin volume market conditions.
The Mortgage Bankers Association has released the weekly Mortgage Applications Index for this week at 11:00 GMT. The previous number showed a 1.6% contraction compared with a week earlier, and this week was no different with a contraction by 0.7%.
Equities are overall in the green, except for China, where both the Hong Kong Hang Seng Index and the Shenzhen Index have retreated over 1%. European and US equities are in the green by 0.25% on average.
According to the CME Group’s FedWatch Tool, expectations for the Fed’s May 1 meeting are at 88.3% for keeping the fed funds rate unchanged, while chances of a rate cut are at 11.7%.
The US Dollar Index (DXY) is entrenching itself (or at least the Dollar bulls are) above 104.00. Shovels and pitchforks are used by traders to make sure that the Greenback does not retreat below 104.00, with the idea that both US GDP and PCE data will beat expectations, favoring a stronger US Dollar. It appears some conviction is creeping in the markets that the US economy will keep soaring, together with a return of inflation. This, in turn, means that the Fed wouldn’t need to cut interest rates three times this year as the economy would be on a path for a soft landing.
That first pivotal level for the DXY is near 104.60, where last week’s rally peaked. Further up, 104.96 remains the level to beat in order to tackle 105.00. Once above there, 105.12 is the last resistance point for now before the Relative Strength Index (RSI) will trade in overbought levels.
Support from the 200-day Simple Moving Average (SMA) at 103.74, the 100-day SMA at 103.48, and the 55-day SMA at 103.64 are unable to show their importance as support because traders didn’t wait for a drop to those levels for a turnaround. The 103.00 big figure looks to remain unchallenged for longer, after the decline in the wake of the Fed meeting last week got turned around way before reaching it.
