The US Dollar slipped on Friday as disappointing economic data dampened investor sentiment. Consumer confidence, as measured by the University of Michigan sentiment index, edged higher but remained subdued, while housing starts declined unexpectedly. Despite these indicators pointing to a potential slowdown, market expectations for a September interest rate cut by the Federal Reserve persisted. This suggests that the Greenback may remain vulnerable to further economic data releases in the coming weeks.
Dollar Weakened on Mixed Economic Data
The US Dollar experienced downward pressure this week as a mixed bag of economic indicators emerged. While consumer sentiment showed signs of improvement, the housing market exhibited weakness.
The University of Michigan’s Consumer Sentiment Index edged higher in early August, surpassing market expectations. This component of the report, measuring current economic conditions, declined, while the gauge of consumer expectations for the next six months rose. Although positive, the overall sentiment reading remains subdued, suggesting ongoing economic uncertainty.
Conversely, the housing sector displayed vulnerabilities. Housing starts plummeted in July, indicating a slowdown in new home construction. Building permits also declined, pointing to a potential contraction in future housing activity. These data points raised concerns about the health of the broader economy and dampened investor optimism.
Despite these mixed signals, market participants remain convinced that the Federal Reserve will implement interest rate cuts in the near future. However, the recent economic data underscores the importance of incoming reports in shaping monetary policy expectations. As such, the Dollar is likely to remain sensitive to economic releases in the coming weeks.
Technical Outlook on the Dollar Index (DXY)
The Dollar Index has been exhibiting signs of consolidation, with the market initially holding steady around the 103 level. However, as bearish momentum strengthened over the weekend, the consolidation level dropped, and bulls found support at 102, making 103 the new resistance level. The upper Bollinger Band also reflected this growing bearish momentum as it descended along with the declining price level. Earlier this week, buyers attempted to rally the market, but it only resulted in a lower high, triggering a selloff that has now brought the market back to the 102 level. Currently, the market is trading within the 102 to 103 price range.
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