Key points:
The dollar stumbled again on Friday, as market participants considered U.S. economic data and the growing likelihood of further interest rate cuts.
Traders now expect 73 basis points of easing for the remainder of the year, with CME Group’s FedWatch Tool indicating a 51% probability of another half-percentage-point cut. This cautious outlook stems from the Federal Reserve’s focus on supporting the labour market while moderating inflation risks.
The U.S. economy continues to show resilience, with the latest data revealing a healthier-than-expected labour market. Corporate profits in the second quarter also grew faster than initially reported. These indicators suggest a solid economic foundation, which has tempered fears of an imminent downturn.
See: Dollar under pressure, trading at 100.445 on the VT Markets app.
The US dollar index (USDX) continues its downward momentum, holding just above the key psychological level of 100 after hitting a 14-month low of 99.86.
On the 4-hour chart, the price has struggled to reclaim the 101.00 mark, with the moving averages providing resistance, especially the 10-period MA. The MACD shows bearish momentum as the MACD line remains below the signal line, with the histogram printing negative values, suggesting further weakness in the near term.
We are observing the 100.30 support level, which has held for now. A break below could open the path towards a retest of the 99.86 low. Conversely, if the index manages to gain strength and push above 100.70, this could signal a potential reversal, with 101.50 acting as a key resistance.
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China’s recent efforts to revitalise its struggling economy have bolstered the Australian and New Zealand dollars. The Aussie hovered near an 18-month high at $0.6889, while the kiwi held firm at $0.6321, close to a nine-month high.
Both currencies have been lifted by China’s decision to lower the cash reserves that banks are required to hold, alongside promises of further monetary and fiscal policy adjustments. The Chinese government has also outlined steps to support household consumption and stabilise the real estate sector, signalling its intent to meet a 5% growth target for the year.
The market participants remain on alert, balancing their expectations between the Federal Reserve’s decisions and China’s economic recovery efforts, which continue to shape sentiment across global markets.
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