US Dollar Index Update
The US Dollar Index (DXY), which gauges the value of the US dollar against a selection of six global currencies, is hovering around 101.10 during early European trading on Wednesday. The index dropped following disappointing U.S. consumer and producer price inflation figures for June, as traders mostly anticipate the U.S. Federal Reserve will implement interest rate hikes this month.
On Friday, Cleveland Fed President Beth Hammack mentioned that higher interest rates might be necessary to combat ongoing inflation. Still, the market seems to predict that rates will stay steady during the next meeting scheduled for July 29, with federal funds futures indicating a 74.9% likelihood of no change—up from 61.5% a month prior, based on the CME FedWatch tool.
Technical Analysis
Looking at the daily chart, the DXY shows a bullish short-term bias. Prices are currently above the 100-day simple moving average (SMA) and Bollinger’s middle band, indicating continued demand for a modest rebound. However, the upper Bollinger band is limiting upside potential in the very short term. Meanwhile, the Relative Strength Index (RSI) sits in positive territory at 57, indicating constructive, though not excessive, momentum.
In terms of resistance, the immediate barrier is located at the upper Bollinger band around 101.50. A clear breakthrough here could lead to the June 24th high of 101.80.
On the downside, initial support is found at the middle band of Bollinger at 101.05, followed by the lower band around 100.55 and a deeper support level near the 100-day SMA at approximately 99.62. This strengthens the medium-term bullish outlook as long as it holds.
Hammack Highlights Inflation Concerns, Supports Fed’s Hawkish Approach
Hammack has adopted a noticeably more hawkish tone, with a Speech Tracker score of 7.2 out of 10—higher than the historical average of 6.6. This reflects increasing worries about persistent inflation. Her points about businesses urging action to curb inflation and consumers facing financial strain, alongside references to pressures on energy and supply chains, underscore widespread price tensions amid solid growth and stable consumer spending. The continuing high inflation is viewed as a “greater concern,” leading to a preference for maintaining restrictive policies longer, thereby supporting the dollar.
The FXS Fed Sentiment Index increased by 2.06 points to reach 128.64, placing it firmly in hawkish territory and in line with the elevated Speechtracker score. Index values above 100 suggest that Fed communications are leaning towards caution regarding inflation, despite positive growth and spending data, which typically bolsters the dollar against both the euro and yen.
