- US traders are keeping an eye on the Fed's impending interest rate decision, even as headlines about rate cuts continue.
- President Trump has reiterated his criticism of trade imbalances, sparking market debate over new tax cuts and oil price demands.
- Solid US growth of between 2.5% and 3.0% is supporting the dollar, although policy ambiguity weighs on sentiment.
- Unemployment claims rose slightly, suggesting that labor market conditions remain resilient.
The US dollar was flat during US trading hours on Thursday. US President Trump spoke at the World Economic Forum in Davos. The US dollar index (DXY) has recovered above 108.00 but is once again under some selling pressure.
Daily Digest Market Trends: US dollar sees deficit despite President Trump's threat of tariffs on Canada and Mexico
- President Trump, who attended the World Economic Forum, reiterated that the U.S. trade deficit with Canada is unsustainable and emphasized his intention to seek further tariff measures if deemed necessary.
- He also expressed a determination to lower business taxes, pressure OPEC to lower oil prices, and seek to influence the independence of the Federal Reserve.
- New jobless claims rose to 223,000 for the week ending January 18, slightly higher than expected. The insured unemployment rate is 1.2% and the number of continuing claims has risen to nearly 1.9 million.
- The US economy continues to grow at a steady annual rate of approximately 2.5% to 3.0%, driven by employment growth, which supports consumption and slightly lifts inflation. Analysts widely expect the Fed to keep interest rates on hold next week and see no convincing argument for an early rate cut.
- Kansas City Fed manufacturing data is expected to be released on Friday, along with services indicators. Leading indicators suggest the U.S. economy maintains its underlying strength, although the market remains wary of potential headwinds.
DXY technical outlook: Index unable to maintain around 108.50, indicator struggling
The US dollar index continues to battle selling pressure, but has yet to sustain gains above 108.50. Momentum signals such as the Relative Strength Index (RSI) are still below the 50 threshold, indicating a weak bias. The MACD red bar is widening, suggesting bearish momentum is increasing.
DXY has stabilized around 108.20, but the lack of follow-through could lead to further downside. Unless there is a new catalyst to reinvigorate buying interest, the dollar's rebound may be short-lived and profit-taking may continue.
