DXY Drops to 96, Market Focuses on Core PCE Inflation Data
The US dollar index (DXY) weakened on Tuesday, falling around 0.1% to 96.88 after posting three consecutive days of gains. This weakening occurred as the market digested mixed comments from Federal Reserve (The Fed) officials regarding the future direction of interest rate policy.
Generally, market participants viewed the dollar as losing momentum after comments from two key Fed officials revealed differing views. Alberto Musalem emphasized the need for cautious interest rate cuts to maintain employment and control inflation. Meanwhile, Stephen Miran suggested deeper cuts might be needed to boost growth if economic data weakens further.
This mixed signal put investors on the defensive. As a result, the dollar was under pressure against other major currencies, with the euro strengthening 0.44% and the Swiss franc rising 0.38%. This suggests global investors are beginning to look to alternative currencies, particularly European currencies, amid uncertainty about the direction of US monetary policy.
However, market participants remained cautious as no major economic data has been released. The spotlight now turns to the PCE core inflation report scheduled for the weekend. This data is considered crucial as a reference for the Fed in determining the next direction of monetary policy.
Technically, the dollar index is moving in the range of 96.80 – 97.00, with the nearest support at 96.00 and resistance at 97.50. If the weakening continues, the DXY has the potential to test the support level, while further strengthening could occur if the Fed's comments or inflation data support a more hawkish outlook.
Investors are also awaiting Fed Chair Jerome Powell's speech in the coming days. Powell's statement will be key to whether the market re-prices the possibility of additional interest rate cuts or, conversely, reinforces the central bank's cautious stance.
With uncertainty still high, analysts expect dollar volatility to increase in the coming days, as global investors seek clearer guidance from the Fed.
Source: Newsmaker.id
