The US Dollar (USD) trades in positive territory against most major peers in the G20 space on Tuesday, with the DXY Index holding above the 107.00 level. The Greenback is back in the graces of investors after the preliminary US Purchasing Managers Index (PMI) release for December showed that the economy expanded at the steepest pace in 33 months driven by the services sector. Meanwhile, the is set to cut its policy rate on Wednesday by 25 basis points – offering a small goldilocks scenario for this week – but increasing expectations that the Fed will slow down its rate-cutting cycle in 2025 keep the USD supported. In Europe, German Chancellor Olaf Scholz lost its vote of confidence on Monday and snap elections are set for February 23. Political instability in Germany, together with the recent woes in France, is resulting in a weaker Euro (EUR), which accounts for 57.6% of weight in the US Dollar Index (DXY). The highlight of Tuesday’s US economic calendar is the US data. November and December are seasonally very retail-sensitive months due to festive holidays such as Thanksgiving and Christmas. Should Retail Sales flourish, that points to healthy consumer spending and growing activity.
Daily digest market movers: Focus on Retail Sales
- The monthly Retail Sales growth is expected to jump to 0.5% from 0.4%.
- Retail Sales excluding Cars and Transportation is expected to tick up to 0.4% from 0.1% the previous month.
- Any revisions to the previous month’s data could be more market moving than the actual reading.
US Dollar Index Technical Analysis: Yields going for the killThe US (DXY) is ticking back up to 107.00 while under the hood of the engine, the bond complex is being torn apart. While investors are selling US bonds – which is triggering a spike in yields – the Federal Reserve is set to cut rates by 25 basis points on Wednesday. Markets are doing their own homework and are already factoring in the effect from Donald Trump’s policies, which could lead the Fed to hold rates or even hike them again in order to keep the economic boost and boom under control. On the upside, 107.00 remains a key level that needs to be reclaimed with a firm daily close above it before considering 108.00. When and if that finally happens, the fresh two-year high at 108.07 from November 22 is the next level to watch for. Looking down, 106.52 is the new first supportive level in case of profit-taking. Next in line is the pivotal level at 105.53 (the April 11 high), which comes into play before heading into the 104-region. Should the DXY fall towards 104.00, the 200-day Simple Moving Average at 104.19 should catch any falling knife formation. (Click on image to enlarge)US Dollar Index: Daily ChartMore By This Author:US Dollar Mixed As PMI Releases Shake Up Markets US Dollar Falls Flat, Possible Sixth Straight Trading Day With Gains Crude Oil Jumps Back Above $70 As US Inventories Fall To Lowest Level
