US Dollar retreats from weekly high following softer-than-expected US GDP numbers.
- The US Dollar retreats to earlier levels from this week. Markets witness US equities attempting a turnaround, shifting back to a risk-on sentiment.
- The US Dollar continues its decline, dipping below 105.00 and approaching 104.50 again.
The US Dollar (USD) eased further on Thursday following the release of US Gross Domestic Product numbers. On Wednesday, the Greenback saw a strong rally, pushing the DXY US Dollar Index above the 105.00 mark. The strengthening Dollar might remind traders of a popular quote from the Friends sitcom: “Well Judy, you did it, she’s finally full!” The bond markets are indeed full, overflowing with US debt, prompting investors to signal they’ve had enough, sending yields higher to allocate all the debt. The recent rise in Treasury yields supports the Greenback as the rate differential balance against other currencies widens.
On the economic data front, Thursday features a busy calendar, with some pivotal releases already out, including the US Gross Domestic Product. Despite being the second estimate for Q1, a softer reading was enough to further ease the US Dollar. Additionally, the closing remarks from two US Federal Reserve members will be closely watched.
US Dollar Index Technical Analysis:
The US Dollar Index (DXY) has strengthened in recent hours as soaring yields prompted a reprising of the Greenback against other currencies, considering the rate differential. As US yields surged, widening the gap with other countries, the US Dollar outperformed against other currencies.
On the upside, the DXY index regained key levels: the 55-day Simple Moving Average (SMA) at 104.96 and the significant 105.00 level. It will be crucial to see if these levels hold as support if US data weakens. If they do, the next targets are 105.52 and 105.88.
On the downside, the 200-day SMA at 104.43 and the 100-day SMA around 104.37 serve as the final line of defense. If these levels break, there is a gap between 104.30 and 103.00. If the US Dollar continues to decline, consider the March low of 102.35 and the December low of 100.62.