- The USD rebounded on Friday after hitting yearly highs near 106.60.
- The market reacted to Fed Chairman Powell’s comments and the probability of a December cut dropped to 60%.
- Retail sales rose 0.4% in October from the previous month, exceeding expectations.
The U.S. Dollar Index (DXY), which measures the value of the U.S. dollar against a basket of six currencies, failed to deliver a sixth straight day of gains during volatile trading on Friday. Federal Reserve (Fed) Chairman Jerome Powell injected uncertainty into markets by expressing reservations about a December interest rate cut as markets evaluate fresh retail sales data.
The US dollar index fell slightly after reaching its highest point of the year. However, DXY remains in an uptrend, boosted by cautious Fed rhetoric and mighty economic data that gives the dollar an edge over other currencies.
Daily market recap: US dollar falls as markets evaluate Powell’s words and retail sales
- Fed Chairman Powell downplayed the need for aggressive monetary easing, citing economic strength.
- Fed officials, including Kugler, reiterated the need for caution when cutting interest rates.
- Market odds of a December cut have fallen to 60% in federal funds futures and 45% in swaps markets.
- The swaps market expects a final interest rate above the Fed’s long-term rate of 2.875%.
- U.S. retail sales rose 0.4% in October, beating expectations and outpacing growth in September.
- The Retail Sales Control Group shrank by 0.1%, while excluding car sales, sales increased by 0.1% m/m, below the consensus.
DXY Technical Outlook: Bulls Pull Back as Investors Book Profits
The DXY Index’s surge to yearly highs above 107.00 was met with rapid profit taking, indicating a potential shift in market sentiment. The pullback suggests that buyers may have overextended the session and a pullback may be advisable.
Indicators including the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) continue to show overbought conditions, so consolidation is likely to continue.
