The US Dollar (USD) recently saw a strong rally, breaking above the 105.00 mark. This led to a slight easing of the Greenback on Thursday as investors showed signs of fatigue with US debt. The rise in Treasury yields has supported the Dollar as the rate differential against other currencies widens. In the coming days, the release of important economic data, such as the US Gross Domestic Product, could sway the market significantly. The weekly Jobless Claims numbers are also expected to impact market sentiment.
The economic calendar for Thursday includes pivotal data points that could move the market. Weekly Jobless Claims are expected to rise, while the second estimate of the US Gross Domestic Product for Q1 is anticipated to show a revision from the preliminary reading. The Goods Trade deficit and Wholesale Inventories numbers for April are also expected to be released. Pending Home Sales data is due at 14:00 GMT, with expectations of a negative print. Keynote speeches by Federal Reserve Presidents John Williams and Lorie Logan are scheduled for later in the day.
Asian equities are facing downwards pressure, with European equities turning mildly green. US indices futures are down slightly. The CME Fedwatch Tool indicates a 52.5% chance of rates remaining unchanged in September, with a smaller chance of a rate cut. The US benchmark 10-year Treasury Note trades at around 4.59%, the highest level this week.
The US Dollar Index (DXY) has strengthened in response to soaring yields, widening the gap with other countries. The DXY reclaimed key levels, such as the 55-day Simple Moving Average and the 105.00 big round level. If US data weakens, support will be tested at these levels. On the upside, resistance levels to watch include 105.52 and 105.88. On the downside, the 200-day SMA and the 100-day SMA are crucial support levels. A decline past these levels could see the USD drop towards the lows of March and December.
In conclusion, the US Dollar’s recent rally has been supported by rising Treasury yields and a widening rate differential against other currencies. Important economic data releases and speeches by Federal Reserve officials could affect market sentiment in the coming days. Investors will closely watch key support and resistance levels for the US Dollar Index as the market digests the latest developments.
