The U.S. Dollar Index (DXY) is hovering around 100.70 on Friday, showing little change after slipping from earlier gains. The dollar received a temporary boost from strong U.S. housing starts and an uptick in consumer confidence, but disappointing building permits and industrial production numbers ultimately held it back.
June saw U.S. housing starts increase at an annual rate of 1.43 million, surpassing the forecast of 1.31 million and up from 1.2 million a year ago. Still, much of this rise was fueled by multifamily construction, while single-family home starts dropped for the third month in a row. Furthermore, the count of building permits fell to 1.37 million, down from an earlier estimate of 1.4 million and from 1.41 million.
In terms of industrial production, there was a modest month-on-month increase of just 0.1%, which is less than the anticipated 0.2% rise and matches May’s growth rate. Although production in mining and utilities rose by 0.4%, manufacturing production remained unchanged.
On another note, the preliminary July report for the University of Michigan Consumer Confidence Index indicated a rise to 54.4, up from 49.5 and above the expected figure of 51.0. The consumer expectation index also saw an increase from 50.7 to 54.0. Interestingly, one-year inflation expectations dipped from 4.6% to 4.2%, while the five-year outlook stayed steady at 3.3%, suggesting that immediate rate hikes from the Federal Reserve are less likely.
Cleveland Federal Reserve President Beth Hammack expressed a careful perspective, emphasizing the need for businesses to manage inflation, noting that price pressures are still quite pervasive. He pointed to solid growth and consistent consumer spending, alongside challenges like energy prices, supply chain issues, and insurance expenses, as well as the rise of AI data centers.
Short-term technical analysis:
Looking at the 4-hour chart, the spot dollar index is currently at 100.74, remaining below the 100-period simple moving average (SMA) of 101.03, which indicates a slight bearish trend. It’s just above immediate support from the 20-period SMA at 100.73, while the relative strength index (RSI) of 47.58 suggests a neutral to weak momentum rather than anything definitive.
On the upside, initial resistance is seen at 100.80, with further resistance near 100.86, and a more significant level at the 100-period SMA of 101.03. For the downside, there’s support positioned around the 20-period SMA at 100.73, followed by horizontal support levels at 100.69 and 100.65. A breach of these could lead to a more substantial correction downward.
