The US Dollar is facing downward pressure as the week begins, following weaker-than-expected Retail Sales data and anticipation of political discussions between President Donald Trump and Russian President Vladimir Putin. This week, the Federal Reserve’s policy update is expected to heavily influence market sentiment.
US Retail Sales for February increased by only 0.2%, below the anticipated 0.7%, while annualised sales growth slowed to 3.1%. The Fed’s consensus indicates no changes to interest rates this week, though expectations for a potential rate cut in May have risen to 27.5%.
Us Dollar Index Outlook
The US Dollar Index (DXY) struggles below 104.00, with indicators showing potential oversold conditions. Immediate support is near 103.50, while resistance is at 104.50, indicating a fragile sentiment amid ongoing geopolitical and economic uncertainty.
Retail Sales data has put the US Dollar under renewed pressure, suggesting that consumer spending may not be as strong as many had expected. With just a 0.2% increase in February, well below the forecasted 0.7%, there is growing concern about the pace of economic activity. Annualised sales growth dropping to 3.1% only adds to this unease.
All eyes are now on the Federal Reserve. While policymakers are widely expected to hold rates steady this week, traders are beginning to shift their expectations further out. The probability of a rate cut in May has now reached 27.5%, reflecting mounting bets that policymakers may be forced to adjust course if economic momentum continues to wane.
DXY remains subdued below 104.00, struggling to find clear direction. Technical indicators suggest the index is treading near oversold levels, yet there is little sign of a convincing rebound. With 103.50 acting as key support, any break below this level could lead to further weakness. On the other hand, resistance is seen at 104.50, meaning rallies may remain constrained unless fundamental drivers strongly shift market positioning.
Political And Market Implications
Beyond economic releases, global political events remain a factor. With discussions expected between Trump and Putin, many will closely monitor any resulting statements. These types of meetings can swiftly alter risk sentiment, with traders quick to adjust accordingly.
For those dealing in derivatives, managing exposure is especially important in the coming sessions. Sentiment remains fragile, and with multiple drivers at play, unexpected volatility could arise. Pricing in potential movements beforehand could help avoid getting caught off-guard. With liquidity likely shifting around key levels, adjusting strategies based on data developments and political updates could make all the difference.
