The US Dollar (USD) is showing strength, trading above the 105.00 mark on Tuesday, with limited movement expected in the near term barring any significant developments. Monday’s gains, initially spurred by French President Macron’s call for snap elections, have been somewhat tempered as Marine Le Pen, leader of the far-right National Rally, opted out of the race. However, the DXY rallied further on news that Macron had not considered resigning, suggesting underlying political instability.
In the meantime, the US Dollar index (DXY) is reacting to political news from Europe while traders anxiously await Wednesday’s US Consumer Price Index (CPI) data for May and the Federal Reserve (Fed) interest rate decision. The economic calendar for Tuesday is relatively light, featuring only the NFIB Business Optimism Index and the Redbook Index.
Market Drivers: Political Drama and Economic Data
- Marine Le Pen’s decision not to run in France’s snap elections is seen as a positive for President Macron and could ease some concerns about political instability in Europe.
- Reports that Macron had considered resigning sparked renewed worries, adding to Euro weakness and US Dollar strength.
- Broad bond sell-off in the Eurozone, particularly in Italy, is raising concerns about financial stress within the region.
- NFIB Business Optimism Index for May exceeded expectations, providing a slight boost to market sentiment.
- Upcoming US Treasury auctions and the Fed’s interest rate decision will be closely watched by investors.
Technical Analysis: DXY in Wait-and-See Mode
The US Dollar Index (DXY) is expected to remain relatively quiet until Wednesday’s key events. On the upside, resistance levels to watch include 105.52, 105.88, and the year-to-date high of 106.51. On the downside, the 55-day, 100-day, and 200-day Simple Moving Averages (SMAs) near 105.05 and 104.47 are providing support, with a further level at 104.00.
