US Dollar gains further ground on quiet Tuesday

• US Dollar DXY experiences a restricted gain as falling US Treasury yields may pose challenges during the session.
• US political changes continue to influence, and core PCE to be on focus next week.
• Fed officials maintain their data-dependent stance, keeping markets on their toes.

On Tuesday, the US Dollar measured by the DXY, witnessed a slight rise, albeit falling US Treasury yields are expected to pose a significant challenge for the rest of the session. This comes amidst expected shifts in financial markets due to new hints about economic plans from former President Donald Trump after Joe Biden’s exit. The focus is still on high-tier data due this week.

Given signs of disinflation in the US, markets express optimism over potential rate adjustments in September. Even with these shifts on the horizon, Federal Reserve officials have reiterated their cautious approach toward deciding on rate changes, hence keeping the markets on their toes. Major indicators to watch out for over the week include Personal Consumption Expenditures (PCE) and Gross Domestic Product (GDP) Q2 revisions.

Daily digest market movers: US Dollar mildly up as focus shifts to PCE

• Mid-tier housing data came in lower than expected with Existing Home Sales posting a higher-than-expected monthly drop in June but didn’t trigger major movements on the USD.
• Weak Richmond Fed manufacturing index didn’t stop the USD bulls from advancing.
• On Friday, forecasts placed the core PCE at a 0.16% MoM increase and the spending is projected at a 0.3% MoM increase.
• The CME FedWatch Tool indicates a highly probable rate cut in September, although GDP and PCE data are set to determine the week’s dynamics for the USD.
• US Treasury yields are down with the 2,5 and 10-year rates at 4.51%, 4.16% and 4.23%.

DXY Technical outlook: A slight bullish spree, yet bearish signs linger

Despite the current uplift above the 200-day Simple Moving Average (SMA), the DXY index still carries a neutral to bearish outlook. Bearish signals resurface as the DXY index’s indicators are still largely in the negative zone, while a looming bearish crossover between the 20 and 100-day SMAs is evident around the 104.80 area. This, if completed, could give substantial momentum to the sellers.