US Dollar Remains Delicate After Mixed PCE Data

The US Dollar DXY is struggling to recover amid mixed PCE data and expectations of a Fed rate cut.
There is still a chance the Fed will cut interest rates in September, although it is somewhat constrained.
Now all eyes are on the FOMC decision next week.

The US dollar, as shown by the DXY, showed some resilience on Friday, despite encountering intraday losses following the release of mixed Personal Consumption Expenditures (PCE) data. The market continues to grapple with the prospect of a rate cut by the Federal Reserve (Fed) in September, although expectations have moderated somewhat.

The U.S. economy has begun to show signs of disinflation, which has boosted confidence in a potential rate cut in September. But Federal Reserve officials remain cautious and data-dependent, so next week’s meeting will be key to near-term market dynamics.

Daily Market Factors Review: US Dollar on Shaky Ground on Mixed PCE Data

The annual core PCE index, excluding volatile food and energy commodities, showed a flat 2.6% growth, belying economists’ forecasts of a 2.5% slowdown.
Monthly core PCE inflation, the Fed’s preferred measure of inflation, rose above expectations of 0.1% to 0.2%.
While the higher pace of growth is seen as eternal, it has failed to quell expectations that the Federal Reserve will cut interest rates by its September meeting, predicting two cuts this year.
Next week, the Federal Open Market Committee (FOMC) will provide markets with additional guidance on the bank’s stance.

DXY Index Technical Outlook: Downtrends continue despite difficulties in maintaining

Even though the DXY is struggling to hold the 200-day Simple Moving Average (SMA), the bearish signals persist. The index direction now largely depends on whether the DXY can hold the aforementioned SMA, but it is likely that the index will move sideways in the coming sessions as indicators including the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) remain in the negative zone but are flattened.

Support is present at 104.15 and 104.00 levels, while resistance is present at 104.30 and 104.50 levels.