• DXY falls as investors favor riskier assets following Powell’s dovish speech.
• Powell suggested the economic outlook is moving closer to the Federal Reserve’s goals.
• Markets have already priced in the September interest rate cut.

The U.S. dollar (USD), as measured by the US Dollar Index (DXY), resumed its decline on Friday, falling below the 101.00 level due to a shift towards riskier investments. The change was prompted by the dovish tone of U.S. Federal Reserve (Fed) Chairman Jerome Powell’s speech in Jackson Hole.

Despite concerns about a slowdown in job growth, Fed officials, including Powell, have maintained a positive view of the U.S. labor market. Data suggests the U.S. economy is still growing above trend, suggesting the market may be overestimating the need for rapid monetary easing.

Daily Market Factors Review: US Dollar Weakens After Powell’s Speech

• Chairman Powell said inflation has fallen significantly, bringing the economy closer to the Fed’s 2% target.
• Powell noted a marked cooling in the labor market, suggesting the economy is no longer overheating.
• The Federal Reserve chairman also noted that the balance of risks had changed, with inflation risks decreasing but employment concerns increasing.
• Chairman Powell said future interest rate cuts will be determined by data, the economic outlook and the balance of risks.
• Market participants have increased bets on a Fed rate cut in response to Powell’s comments, with a September cut now fully priced in.

DXY Technical Outlook: Bearish Bias Is More Clear, Correction Possible

The DXY index technical outlook remains bearish. However, buyers have tried to initiate an uptrend. The index remains below its 20-, 100- and 200-day uncomplicated moving averages (SMA), indicating a bearish bias. The relative strength index (RSI) is below 30, indicating continued and overextended selling pressure. The moving average convergence-divergence indicator (MACD) remains in negative territory with red bars.

With this in mind, it is vital to consider that indicators are showing oversold signals, which creates a potential risk of an upward correction.

Support Levels: 101.00, 100.50, 100.30

Resistance levels: 101.50, 101.80, 102.20.