The strength of the US dollar continues as the market adjusts to the decline in consumer sentiment

The DXY rally continues through Friday, reaching its highest level since early May.
Consumer confidence from UoM data is below expectations, hurting market sentiment, but DXY maintains daily gains.
US Treasury yields remain low, signaling that the market environment is risk-free.

On Friday, the US dollar index (DXY) shrugged off the release of frail data and continued its positive trends. The index is currently hovering around its highest level since early May near 105.80, before retreating to 105.60 but maintaining daily gains.

The economic outlook for the United States remains mixed. The Federal Reserve (Fed) continues to hold its revisions to economic activity steady, but has revised its estimates of personal consumption expenditures (PCE) upward. Additionally, preliminary analysis suggests moderating inflation but a resilient labor market, leading the Fed to anticipate fewer rate cuts. On Friday,

Consumer confidence data from the University of Michigan showed destitute results, hitting a seven-month low. That made dollar reduction part of everyday gains because much of the U.S. economy relies on consumer spending.

Daily Market Change Summary: DXY Holds Line After JM Data, Markets Adjust to Fed Decisions

Wednesday’s FOMC scatterplot update shows the median expectation of just one rate cut in 2024.
Markets had previously predicted one or two rate cuts in 2024, but the situation changed after the Fed announced its decision.
The University of Michigan Consumer Confidence Index in the US fell from 69.1 in May to 65.6 in early June, below market expectations of 72. This decline was also reflected in the Current Conditions Index, which fell from 69.6 to 62.5 .
The consumer expectations index also decreased slightly from 68.8 to 67.6. The five-year inflation outlook increased from 3% to 3.1%.

DXY Technical Analysis: Bulls continue to dominate, holding above the SMA

Since Friday’s session, technical indicators have maintained a positive attitude. The Relative Strength Index (RSI) remains above 50 and the Moving Average Convergence Divergence (MACD) continues to reflect green signaling bars. Moreover, the index is holding above the 20-, 100- and 200-day straightforward moving averages (SMAs). The combination of these factors strengthens the bullish outlook for DXY.