The USD has seen a slight increase today, mainly due to mixed performance in Asian equity markets and weak trends in US equity futures. Marginal gains have been observed against high beta/commodity currencies, such as AUD, NZD, SEK, and NOK.
Recent US CPI data showed lower than expected headline and core inflation rates, which may not fully account for weaker consumer demand as indicated by declining airfares. Concerns about potential US tariffs have also influenced market sentiment.
Dxy Index Performance
The DXY index has experienced limited gains, possibly reflecting a mild technical correction within a continuing downtrend. Current resistance levels are noted at 103.70 and 104.00/05.
CFTC data points to a reduction in net USD long positioning, though most traders remain long on USD. Despite this, active traders have maintained their USD exposure relatively unchanged.
Today’s subdued performance across Asian equities, coupled with soft US equity futures, has given the US dollar a mild boost. Gains have primarily been seen against currencies closely tied to commodities and economic growth, such as the Australian dollar and Norwegian krone. These currencies tend to weaken when risk sentiment takes a hit or economic uncertainty rises. It’s not a sweeping rally for the greenback by any means, but a modest move in its favour.
The most recent inflation report from the US presented headline and core figures that undershot expectations. Lower price growth can provide a reason for policymakers to ease up on potential future rate hikes. However, there’s another layer to this—consumer demand appears to be softening, a point underscored by declining airfare prices. This isn’t entirely captured by the CPI report alone.
Trade policy concerns have also entered the picture. Worries surrounding possible tariff decisions from the US government have started to weigh on broader sentiment. While these policies are still unclear, the mere possibility of restrictions being imposed has likely contributed to the cautious tone in markets.
Looking at the DXY index, we see only limited upside so far. The dollar has firmed a little, but this might just be a small technical correction rather than the start of a broader shift upwards. With the ongoing downward momentum in place, traders will likely be watching the 103.70 and 104.00/05 levels closely to see if they hold as resistance.
Positioning data from the CFTC tells us that net long positions on the dollar have scaled back, though that doesn’t mean the market has turned decidedly bearish. Many traders are still long USD, even if the overall exposure hasn’t changed much. Large shifts in positioning can sometimes give us clues about where sentiment is headed, but for now, there’s been no major exodus.
Market Volatility Ahead
Over the next few weeks, volatility could pick up as new inflation data, policy developments, and shifts in risk appetite come into focus. Price swings may be more pronounced if any unexpected economic reports or geopolitical headlines emerge. The resistance levels mentioned earlier could play an important role in dictating whether the dollar remains under pressure or if traders start reassessing their stance.
