The US Dollar Is Still on the Edge Despite Having a Good Week

Over the week, the US dollar recovered against its major rivals, and by the end of the week, the market cooled down and conserved its gains on a higher level as the US Dollar Index consolidated its week’s gains. Traders and analysts are looking forward to the outcome of the meeting slated to be held before the weekend. They are on high alert as they await the outcome of the Federal Reserve executive meeting and the release of macro data. The crisis currently faced by US banks and the country’s rising debts were to be part of the agenda.

Despite the anticipation of this key event, the US dollar has had its best week so far since mid-March.

Key Points About the Fundamental Perspective on the US Dollar Index

• The president of the United States of America and his legislative bodies has postponed the meeting slated for this week. The meeting was expected to handle negotiations on the debt limit.
• PacWest disclosed in a securities report on Thursday that the bank’s deposits fell by about 10% the previous week. The financial-heavy Dow Jones Industrial Average dropped about 0.7% on the day as a result of the bank’s shares losing more than 20% of their value.
• The Consumer Price Index (CPI) inflation between March and April, which does not include the volatile price of food and energy, decreased from 5.6% to 5.5%. The CPI and Core CPI increased by 0.4% every month, in line with analysts’ expectations.
• Neel Kashkari, president of the Minneapolis Federal Reserve, commented on the prospects for Federal Reserve (Fed) policy, stating that inflation is decreasing. He also stated that whatever policies were implemented should be upheld continuously.
• The BLS report published on Thursday In the US, the Producer Price Index (PPI) for final demand increased 2.3% on an annual basis in April, which was less than the 2.7% increase seen in March.
• The United States Treasury Secretary, Janet Yellen, issued a warning on Thursday that if the US government fails to meet the debt ceiling, it could result in an economic catastrophe. On Friday, Janet assured the press that she is doing her best to work with congressmen to see that the debt ceiling is raised.
• According to the US Department of Labor’s weekly figures, 264,000 new first claims for unemployment benefits were filed during the week ending May 6. This print is above the 245,000 market expectation and follows the unrevised 242,000 from the previous week.
• According to the CME Group FedWatch Tool, markets are already factoring in a chance of the Fed maintaining its policy rate at the coming policy meeting of more than 80%.
• Before settling around 3.4% in the early hours of Friday, the benchmark 10-year US Treasury note yield dropped by over 2% on Thursday.

Technical Analysis: The US Dollar Index Is Considerably Bullish

The United States Dollar Index appreciated above 102.00 on Thursday. Also, the market closed above the 20-day moving average on Thursday. This data shows a very impressive performance of the market. But this was not the case at the beginning of the week. The next bullish target for the dollar index is the 103.00 level. This level should also act as the next psychological level.

On the daily chart, the Relative Strength Index (RSI) indicator increased marginally over 50, signaling the development of positive momentum.

The first support on the downside is formed by 101.65 (20-day SMA). A daily close below that mark would encourage selling and pave the way for a prolonged slide in the direction of 100.00 and the psychologically significant level of 101.00.