US Dollar undergoes spike in volatility, though goes nowhere on the chart

Share:

• The US Dollar trades flat in the PCE aftermath. 
• Markets are looking for direction with PCE in line of expectations. 
• The US Dollar Index trades around 104.00, unable to move away from any direction. 

The US Dollar (USD) is all over the place, though in a very tight range in the US Personal Consumption Expenditures (PCE) Price Index data release aftermath. The Greenback is moving up and down around 104.00, though looks unable to unchain itself from the level in any direction. It looks like markets are still in a wait-and-see pattern and might look forward to March for the actual central bank rate decisions to shed more clarity on where to place the DXY. 

On the economic front, some lighter data ahead with the Chicago Purchase Managers Index. No less than three, even four for those who want to stay up late, US Federal Reserve speakers set to release comments on the current monetary policy. Head of the St Louis Fed Christopher Waller advocated for three rate cuts this year in overnight comments. 

Daily digest market movers: A lot of parts, though nothing moving

• At 13:30 GMT, both the Jobless Claims and Personal Consumption Expenditures Price Index were released:
  • Jobless Claims for this week:
    • Weekly Initial Jobless Claims went from 202,000 to 215,000.
    • Continuing Jobless Claims went from 1.860 million to 1.905 million. 
  • Personal Consumption Expenditures (PCE) Price Index for January:
    • The monthly Headline PCE accelerated from 0.2% to 0.3% as expected, while the yearly reading went from 2.6% to 2.4%.
    • Fore the core reading, which excludes the more volatile categories of food and energy, the monthly PCE went from 0.2% to 0.4%. The yearly core PCE went from 2.9% to 2.8%. Both as expected.
    • Personal Income increased, from 0.3% to 1.0%, while Personal Spending decelerated substantially, from 0.7% to 0.2%.
• At14:45 GMT, the Chicago Purchasing Managers Index for February will be released. Expectations are for a jump from 46 to 48, which means the index will likely remain in contraction.
• At 15:00 GMT, though probably less relevant for this trading day, Pending Home Sales data for January will be released. Sales are expected to decelerate sharply,  from a 8.3% increase in December to 1% in January. 
• the last economic number for this Thursday will be the Kansas City Fed Manufacturing Activity Index for February. The previous number was at -17, with no forecast pencilled in. 
• A slew of US Federal Reserve speakers will make its way to the stage as well: 
  • Expect around 15:50 GMT comments from the head of the Atlanta Fed, Raphael Bostic.
  • Briefly after Bostic, around 16:00 GMT, the head of the Chicago Fed Austan Goolsbee will speaking..
  • Around 18:15 GMT, Loretta Mester, head of the Cleveland Fed, will also take the stage..
  • Overnight, at 01:10 GMT, John Williams from the New York Fed will shed his light as well at the start of Friday. 
• Equities are applauding the in-line PCE report, which eases the negativeness from the red hot Consumer Price Index (CPI) report from two weeks ago. All US equity futures are in the green ahead of the US opening bell while european equities are near 0.50% of intraday gains. 
• According to the CME Group’s FedWatch Tool, expectations for a Fed pause in the March 20 meeting are at 97.5%, while chances of a rate cut stand at 2.5%. 
• The benchmark 10-year US Treasury Note trades around 4.28%, broadly unchanged for the past two days. 

US Dollar Index Technical Analysis: Nothing to see here

The US Dollar Index (DXY) is postponing its day of ordeal by another week after even the recent PCE data release could not move the needle for the Greenback. The report almost fell completely in line with expectations, which were elevated after a hotter CPI print two weeks ago and some surprise upticks in the PCE data during the US Gross Domestic Product (GDP) release on Wednesday. Traders are again keeping their powder dry and are unwilling to pick a direction, possibly awaiting both the European Central Bank and the US Federal Reserve meetings in March before picking a direction and unchaining the DXY finally. 

To the upside, the 100-day Simple Moving Average (SMA) near 103.98 is still the first element acting as a cap. Should the US Dollar be able to cross 104.60, 105.12 is the next key level to keep an eye on. One step beyond there comes 105.88, the high from November 2023. Ultimately, 107.20 – the high of 2023 – could come back into scope. 

Looking down, the 200-day Simple Moving Average at 103.74 has been broken twice recently, making it a weak support. The 200-day SMA should not let go that easily though, so a small retreat back to that level could be more than granted. Ultimately, should it lose its force with the ongoing selling pressure, prices could fall to 103.16, the 55-day SMA, before testing 103.00.