On Thursday, the US Dollar, represented by the DXY index, saw a slight increase following a better-than-expected Q2 Gross Domestic Product (GDP) report. Despite this positive news, the chances of a September rate cut by the Federal Reserve (Fed) remain high, which could limit further gains for the US Dollar.
The US economy’s outlook shows mixed signals, with signs of disinflation prompting expectations of a Fed rate cut in September. However, the Fed is cautious and maintains a data-dependent approach, delaying any immediate action.
Key Market Updates: US Dollar Reacts to Positive Q2 GDP Data
- The US GDP for Q2 expanded at an annual rate of 2.8%, surpassing expectations and showing growth from the previous quarter.
- Initial Jobless Claims reported a better-than-expected figure, while Durable Goods Orders saw a significant decline in June.
- The CME FedWatch Tool indicates a high probability of a rate cut in September.
DXY Technical Analysis: Bearish Signals Persist Despite Support Levels
Despite finding support around the 200-day Simple Moving Average (SMA), the DXY index faces bearish indicators with the RSI and MACD in negative territory. A recent bearish crossover adds to the downward pressure on the US Dollar.
Key support levels are at 104.30 and 104.00, while resistance is expected around 104.50 and 105.00.
Understanding the US Dollar: Impact of Federal Reserve Policy
The US Dollar is the world’s most traded currency, heavily influenced by the Federal Reserve’s monetary policy. The Fed’s decisions on interest rates and quantitative easing can impact the Dollar’s value significantly.
Quantitative easing weakens the Dollar by increasing credit flow, while quantitative tightening strengthens it by reducing bond purchases. These policy tools are crucial in shaping the Dollar’s value in the global market.