- The US dollar weakened following the University of Michigan’s economic sentiment index and housing market data.
- The market remains confident of a rate cut in September.
- The dollar may remain sensitive to data releases.
The US Dollar (USD), as measured by the US Dollar Index (DXY), fell on Friday following the release of University of Michigan Consumer Sentiment figures and weaker-than-expected housing market data.
According to the US Economic Outlook, a careful evaluation of the data suggests that the US economy continues to grow above trend, which indicates that the market is overpricing aggressive easing measures as the Federal Reserve continues to rely on data.
Daily Digest Market Trends: Dollar falls as UoM data and weak housing market numbers are mixed
- The University of Michigan Consumer Sentiment Index rose to 67.8 in early August from 66.4 in July, and also beat market expectations of 66.9.
- The current situation index showed a decline, dropping from 62.7 to 60.9, while the consumer expectations index rose from 68.8 to 72.1.
- In contrast, U.S. housing starts fell 6.8% in July to 1.238 million units, signaling a softening housing market.
- Additionally, building permits fell 4% after increasing 3.9% in June.
- The market remains overconfident that the Fed will cut rates soon, but it all depends on upcoming data.
DXY technical outlook: Consolidation trend continues, overall bearish bias remains
Technical analysis shows that the DXY is trending sideways with indicators showing deep consolidation in the negative territory. The Relative Strength Index (RSI) is currently around 40 and the red bars on the Moving Average Convergence Divergence (MACD) indicator are stabilizing, indicating that price movement is being contained. Despite some upside seen on Thursday, the overall technical picture remains bearish. Buyers are struggling to make any significant moves and the DXY index is trading in the 102.50-103.30 channel.
Support Levels: 102.40, 102.20, 102.00
Resistance Levels: 103.00, 103.50, 104.00
