The US Dollar has recently experienced a significant fall, reaching its lowest value since March. This decline can be attributed to several key factors, such as the Federal Reserve’s dovish stance and lower US Treasury Yields. The market sentiment towards the USD has been impacted by the expectation of potential rate cuts by the Federal Reserve, leading to downward pressure on the currency.
Impact of Strong Housing Data
Despite the release of positive housing data indicating an improvement in Housing Starts and Building Permits, the US Dollar was unable to reverse its downward trend. The Housing Starts in June reported a 3% increase, following a 4.6% decrease in May. Building Permits also showed a surge of 3.4% after a decline of 2.8% in the previous month. However, these positive indicators were overshadowed by the dovish bets on the Federal Reserve, leading to continued weakness in the USD.
Market Expectations and Technical Outlook
Market expectations for a potential rate cut in September have weighed on the US Dollar, with the CME FedWatch Tool pricing in the likelihood of a cut. This has further pressured the USD lower, despite efforts to regain the 104.00 area. The daily indicators, such as the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD), are signaling a near-oversold condition for the DXY. While there may be a slight correction in the near term, strong support levels are seen at 103.50 and 103.00. Overall, the technical outlook remains bearish for the US Dollar in the current market environment.
The US Dollar’s fall to its lowest value since March can be attributed to various factors, including the dovish bets on the Federal Reserve, lower US Treasury Yields, and market expectations of a potential rate cut. Despite positive housing data, the USD was unable to reverse its decline. The technical indicators suggest a bearish outlook for the US Dollar, with strong support levels at 103.50 and 103.00. The market sentiment continues to be influenced by the Federal Reserve’s approach to monetary policy, leading to continued weakness in the USD.