The US Dollar (USD) has entered volatile trading on Friday, attempting to extend its winning streak to six consecutive sessions. Positive economic data and Federal Reserve (Fed) commentary have created a mixed but broadly supportive environment for the Greenback. The US Dollar Index (DXY) sees heightened activity, with traders eyeing critical levels amid shifting rate cut expectations.
Key Market Movers
US Retail Sales Surprises:
- October Headline Retail Sales: Increased by 0.4%, surpassing the 0.3% forecast.
- September Revisions: Marked up sharply to 0.8%, doubling the previous estimate.
- Strong retail performance sets an optimistic tone ahead of the US shopping season.
Manufacturing Data:
- The New York Empire State Manufacturing Index surged to 31.2 in November, smashing expectations of -0.7, signaling robust manufacturing activity.
- Industrial Production fell 0.3% in October, aligning with forecasts but showing weakness compared to revised September data.
Federal Reserve Signals:
- Fed Chair Jerome Powell tempered expectations for a December rate cut, emphasizing the economy’s resilience and a healthy job market.
- Boston Fed President Susan Collins also hinted that a cut is not guaranteed, despite market anticipation.
Geopolitical Developments:
- Discussions between German Chancellor Olaf Scholz and Russian President Vladimir Putin introduced a layer of geopolitical risk, potentially impacting markets tied to the Euro and broader sentiment.
Global Equities:
- Asian markets ended mixed, while US futures indicate pressure, especially on tech-heavy indices like the Nasdaq.
Technical Analysis: US Dollar Index (DXY)
Resistance:
- The 107.00 level remains pivotal as the DXY eyes further upside.
- A break above 107.35 could push the index to test two-year highs.
Support: - Initial support lies at 105.93 (Tuesday’s close).
- Stronger support stands at 105.53, aligning with the April 11 high.
- Momentum Indicators:
- RSI and moving averages signal a robust uptrend, but overbought conditions could spark temporary pullbacks.
Outlook and Strategy
The USD remains supported by:
- Widening interest rate differentials as the Fed hints at a pause in rate cuts while other central banks, such as the ECB, proceed with easing.
- Strong economic fundamentals, including retail and manufacturing activity.
- Seasonal demand linked to holiday spending.
Trading Levels to Watch
Upside Targets:
- 107.00 (short-term resistance)
- 107.35 (yearly high, potential breakout level)
Downside Risks:
- 105.93 (near-term support)
- 105.53 (critical pivot point)
Traders should monitor Fed commentary and geopolitical headlines for any directional shifts in the USD’s trajectory.
