The US Dollar remains stable despite mixed economic data and the Los Angeles wildfires. The US Dollar Index (DXY) hovers around 109.00 as Retail Sales figures diverge and Jobless Claims rise. A lack of significant market impact is expected from the upcoming NAHB Housing Market Index.
The US Dollar remained relatively stable following the opening bell on Thursday. US Retail Sales data presented a mixed picture, while weekly Jobless Claims were influenced by the devastating wildfires in Los Angeles. The US Dollar Index (DXY), which measures the value of the US Dollar against six major currencies, hovered around 109.00, indicating a lack of clear direction. The release of Retail Sales and Jobless Claims figures had a conflicting impact on the DXY.
Despite upside revisions to the Retail Sales data, the actual figure fell short of expectations. Conversely, the Los Angeles wildfires contributed to an increase in Jobless Claims. The final data point for Thursday is the National Association of Home Builders (NAHB) Housing Market Index for January. However, significant market impact is not anticipated from this release. Although the elevated interest rate environment could negatively influence sentiment within the housing market. There were notable shifts in economic indicators released on Thursday. Monthly Retail Sales decreased to 0.4%, below the anticipated 0.6% for December, compared to the previous month's 0.7%, which was revised upward to 0.8%. Initial Jobless Claims for the week ending January 10 rose to 217,000, while the previous week's 201,000 figure was revised to 203,000. The Philadelphia Fed Manufacturing Survey for January came in at 44.3, exceeding the -5 forecast. The previous -16.4 reading was also revised upward to -10.9. The NAHB Housing Market Index for January, scheduled for release at 15:00, is expected to decline slightly to 45 from 46 in the previous reading. Equity markets experienced a downturn on Thursday, with traders initiating profit-taking on positions fueled by disinflationary expectations from Wednesday's trading session. The CME FedWatch Tool indicates a 97.3% probability that the Federal Reserve will maintain interest rates at their current levels during the January meeting. Market expectations suggest that the Federal Reserve will remain data-dependent, considering uncertainties that may influence the inflation trajectory after President-elect Donald Trump's inauguration on January 20. The US 10-year yield traded around 4.653%, significantly lower than its peak of 4.807% reached on Tuesday. US Dollar Index Technical Analysis: The US Dollar Index (DXY) is currently at a crossroads, potentially poised to either sustain its rally or face a substantial correction. While markets may celebrate mixed inflation data interpreted as disinflationary, the Federal Reserve is unlikely to commit to any specific course of action based on this data alone. Inflation could resurge and accelerate upward, leading to further gains for the DXY. Markets are currently misaligned, relying solely on one 'mild' disinflationary report at the start of the year. On the upside, the DXY faces key resistance at the 110.00 psychological level. Beyond this level, the next significant resistance lies at 110.79. Further upward movement would extend the DXY's reach to 113.91, the double top encountered in October 2022. On the downside, the DXY is testing the ascending trend line originating from December 2023, currently positioned around 108.95 as immediate support. If the downtrend persists, the next support level lies at 107.35. Further downward movement could encounter resistance at 106.52, with interim support provided by the 55-day Simple Moving Average (SMA) at 107.10.
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