The US Dollar managed to extend its winning ways on Friday, with the DXY Index reaching heights above 107.00 for the first time in over two weeks. This upward momentum was driven by lingering inflationary pressures within the US economy, which provided the necessary impetus for the currency’s strength.
In the Friday trading session, there were no major economic data releases to significantly sway the market. The US Dollar Index, which gauges the dollar’s value against a basket of currencies, exhibited a relatively neutral stance with minor gains during the US trading hours. However, the Greenback did experience some pressure from profit-taking activities, following its sharp rallies against numerous G20 currencies earlier in the week. This retracement was also influenced by the release of new Chinese economic data and details of the Chinese government’s stimulus package.
The dollar’s position was further bolstered by rising US Treasury yields, which counterbalanced the market’s anticipation of a rate cut in the upcoming Fed decision. The November Producer Price Index (PPI) data came in hotter than expected, with the headline figure showing a 3.0% year-on-year increase, surpassing the forecasted 2.6%. The core PPI, excluding food and energy, surged by 3.4% year-on-year, exceeding analysts’ projections. Additionally, the PPI Services component remained elevated, suggesting persistent underlying inflationary pressures.
Despite the strong inflation data, the markets have fully factored in a 25 basis points rate cut by the Fed next week. Many analysts predict a “hawkish cut,” which could potentially lead to a pause in January.
From a technical perspective, the US Dollar Index has continued to trade above the 107.00 mark, recovering from its recent lows. The RSI and MACD indicators indicate that the DXY has regained some strength, although it may encounter resistance in the 107.00 – 107.50 range. If the index manages to break above this zone, it could potentially retest the 108.00 level. However, the momentum seems to be waning, which could limit further upward movement in the short term as the market awaits the Fed’s decision with bated breath.
Related topics:
US CPI Anticipated Rebound in November and Its Impact
WTI’s Ascent on China’s Policy Shift and Market Forces
