The US Dollar (USD) is rebounding from weekly lows, as investors adjust their positions for a week of high-profile earnings and closely watched economic data. The approaching US debt ceiling deadline and lack of clarity on the Federal Reserve’s interest rates outlook are weighing on market sentiment.
The US Dollar Index is rising towards 102.00, after losing nearly 0.5% on Monday.
Four major central banks – the European Central Bank (ECB), the Bank of Japan (BoJ), the Bank of England (BoE), and the Swiss National Bank (SNB) – announced that they will reduce the frequency of their dollar operations with the Fed from May 1 due to the receding volatility in financial markets. This joint statement seems to be providing additional support for the USD.
The earnings reports this week include potential market movers such as Alphabet Inc, Microsoft Corp, Meta Platforms Inc, and Amazon.com. On the macroeconomic front, the first quarter Gross Domestic Product (GDP) and April Personal Consumption Expenditures (PCE) Price Index will be closely scrutinized.
The mid-tier US Conference Board Consumer Confidence data and housing data will also entertain US Dollar traders.
In terms of market movement, US house prices rose by 0.5% in February, while consumer sentiment weakened modestly in April. Sales of new single-family houses rose by 9.6% in March. However, the headline Business Index of the Federal Reserve Bank of Dallas’ Texas Manufacturing Survey plunged to -223.4 in April from -15.7 in March.
The approaching US debt ceiling deadline remains a concern, and the House of Representatives is expected to vote on a Republican-led debt and spending bill this week. Meanwhile, 10-year US Treasury bond yields are falling towards 3.40% after breaching the 3.50% key level on Monday.
The Fed is in the blackout period ahead of its May 3 monetary policy announcements. Markets are currently pricing a roughly 90% probability of a 25 basis points Federal Reserve (Fed) rate hike at the upcoming meeting, according to the CME Group FedWatch Tool.
Technical analysis shows that the US Dollar Index is trying to gather bullish momentum, and a daily closing above the bearish 21-Day Moving Average could initiate a fresh upswing toward the 102.50 psychological barrier.
However, with the 14-day Relative Strength Index still below 50.00, recovery attempts in the US Dollar are likely to be sold into. Immediate support is seen at the intraday low of 101.19, with deeper declines seeking validation from the multi-month low reached on April 14 at 100.78.
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