US Dollar struggles to gather traction on quiet Monday – Crypto News – Crypto News
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Markets will closely follow the PCE data and German inflation Markets will closely follow the PCE data and German inflation

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US Dollar struggles to gather traction on quiet Monday – Crypto News

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5 months ago

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  • The DXY remains stuck around 106.00, looking for direction on Presidents’ Day.
  • Fed funds futures price in 50 basis points of rate cuts for 2025 after weak Retail Sales data.
  • Traders are eyeing global February PMI readings on Friday for potential divergence signals.
  • US tariff concerns persist with auto levies expected to begin on April 2.

The US Dollar Index (DXY), which tracks the US Dollar’s performance against six major currencies, trades flat on Monday as traders monitor new geopolitical developments. With ongoing talks in Riyadh regarding a Ukraine-Russia peace deal, markets are assessing potential outcomes and their impact on risk sentiment. At the time of writing, the DXY remains stuck above the 106.00 range with investors awaiting key economic data later this week.

Daily digest market movers: US Dollar remains range-bound as markets digest mixed signals

  • The US Dollar hovers near last week’s low with no clear directional momentum.
  • Fed funds futures now price in 50 basis points of rate cuts for 2025 following weak US January Retail Sales data.
  • Despite the Retail Sales miss, consumer spending remains supported by real wage growth, a solid labor market, and strong household balance sheets.
  • Traders may not see much USD relief until Friday when global February PMI data could highlight divergence among economies.
  • Philadelphia Fed President Patrick Harker, Fed Governor Michelle Bowman, and Fed Governor Christopher Waller will speak on Monday.
  • Last Friday, Fed President Lorie Logan cautioned that lower inflation does not automatically warrant further rate cuts.
  • Markets continue to shrug off tariff concerns despite US President Donald Trump confirming auto levies will begin on April 2.
  • Country-by-country reciprocal tariffs are also set to take effect around the same time, though implementation may be gradual.

DXY technical outlook: Key support in focus as bearish pressure builds

The US Dollar Index struggles to maintain momentum after losing the 20-day Simple Moving Average (SMA), reinforcing a bearish outlook. The Relative Strength Index (RSI) remains in negative territory, confirming weakening momentum, while the Moving Average Convergence Divergence (MACD) suggests a steady bearish trend.

Immediate support is seen at the 100-day SMA near 106.30 with a break below this level likely to confirm a negative short-term outlook. Resistance remains at 106.80, followed by the 20-day SMA at 107.20.

Fed FAQs

Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.

The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.

In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.

Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.

 

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