The US Dollar Index (DXY), which measures the US dollar against a range of other currencies, experienced strong buying momentum for the third consecutive day, reaching a level close to 99.54 on Thursday, its highest since early April. However, it pulled back a bit during early trading in Europe, settling around 99.35, yet still registering an increase of about 0.15% for the day as bullish sentiment grows cautious ahead of key US economic data.
On Thursday, the US will release preliminary Q1 GDP data along with the Personal Consumption Expenditures (PCE) price index. The PCE is the Federal Reserve’s favored measure of inflation and is likely to shape market expectations about future monetary policy, which could provide additional support to the US dollar. Moreover, ongoing speculation around a potential interest rate hike by the Federal Reserve later this year, combined with intensifying tensions in the Middle East, continues to benefit the dollar as a safe-haven asset.
From a technical angle, the short-term outlook is bullish since the DXY remains above the 200-period exponential moving average (EMA) on the 4-hour chart, indicating that the broader uptrend is still intact despite recent fluctuations. Additionally, the Moving Average Convergence Divergence (MACD) has turned slightly positive, and the Relative Strength Index (RSI) sits around 58. This suggests a healthy upward momentum, though not excessively strong, which could pave the way for further gains in the near future.
On the downside, initial support is located at the 200-period EMA around 98.81. A drop below this level could undermine the currently optimistic outlook and expose the index to a risk of a larger correction towards previous lows that are not shown in this snapshot. As long as the index remains within the fundamental demand area, the technical picture looks favorable for a recovery towards the psychological level and prior swing high above 99.50, even if there are minor pullbacks along the way.
