Usd Index Trades Lower As Bearish Pressure Prevails

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Usd Index Trades Lower As Bearish Pressure Prevails

USD Index Trades Around 104.70 As Bearish Pressure Prevails

The US Dollar index trades near the 104.70 level as the bearish pressure prevails in the short term. The investor's focus is now on the Fedspeak and the upcoming US economic data.

Yesterday, the DYX managed to touch 104.90, which is a 6-month high for the index. Since then, the DYX has been facing consistent selling, which can be attributed to profit-taking and the investor's cautious approach to the upcoming data.

Although the US bond yields continue to rise, we are not seeing the same optimism with the US Dollar at all. As for the reason behind this strange behavior, the only thing that makes sense is that the DYX is already at multi-month highs.

Fed's Potential Policy Shift In Q2 2024

There's also a rise in the speculations that the Fed will change its recent policy in Q2 of 2024 and will start to introduce rate cuts. So, on that front, that's yet another reason why the DXY is on the back foot.

If we look at the data docket, we have the upcoming Balance of Trade, MBA Mortgage Applications, and the PMI from S&P Global. In addition, the Beige Book is also due in the next few days, which will allow us to gauge the performance of the US economy on a regional scale.

However, the most important event of all is the Fed speakers from Dallas and Boston. Investors will be paying close attention to what these Fed speakers have to say about the interest rate and the general state of the US economy.

Despite the short-term weakness in the DXY, the bigger picture is still positive, as there's a high chance that the index might target the 10,500 level soon. Meanwhile, the US economy is in good health, which supports the narrative of high-interest rates for a long period.

On the contrary, the US economy is facing disinflation, and the labor market is also showing signs of cooling down. So that's yet another factor that supports the case of a bearish DXY and a bearish USD.

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