The US Dollar Index (DXY) edged slightly higher on Thursday after a sharp decline on Wednesday. This uptick might be a temporary pause for sellers rather than a sign of a reversal.
Reasons for the Rebound:
- Profit-Taking: Sellers might be taking some profits after the strong downward move on Wednesday.
- Technical Correction: Short-term technical indicators suggest a potential short-term correction after a significant decline.
Downside Bias Likely to Persist:
- Weak US Data: Recent economic data, including jobless claims and manufacturing data, points towards a potential slowdown in the US economy.
- Soft Inflation: Lower-than-expected inflation data reinforces expectations of a dovish Federal Reserve.
- Expectation of Rate Cuts: The prospect of interest rate cuts by the Fed weakens the US Dollar.
Technical Analysis:
- Mixed Signals: RSI is flat in negative territory, indicating weakening buying momentum. MACD also shows a lack of strong directional bias.
- Short-Term vs. Long-Term: While the DXY is below the 20-day SMA (short-term bearish), it remains above the 100-day and 200-day SMAs (longer-term bullish).
