The US dollar softened after mid-level economic data

• Durable goods orders remained nearly flat in August.
• US GDP grew at an annual rate of 3.0% in the second quarter of 2024.
• US initial jobless claims fell to 218,000 in the week ended September 21.

The U.S. dollar index (DXY), which measures the USD against a basket of six currencies, is flat after a weak market reaction to a series of robust U.S. economic data. DXY was trading at 100.88 at the time of writing.

Economic data this week showed evidence of the resilience of the US economy. Furthermore, the Fed has already stated that its response will depend on the interplay between these contrasting signals, balancing the need to address potential risks while ensuring the continued health of the economy.

Daily Market Reasons: US Dollar Sees Losses After Data Points, Fed Speakers

• New orders for U.S. manufactured durable goods were basically unchanged in August, rising a marginal $0.1 billion to $289.7 billion, marking the sixth increase in seven months.
• Excluding transportation, new orders rose 0.5 percent, driven by a 1.9 percent increase in electrical equipment, appliances and components. Excluding defense, new orders fell 0.2%.
• US Gross Domestic Product (GDP) grew at an annual rate of 3.0% in the second quarter of 2024, in line with the original estimate.
• US initial jobless claims fell to 218,000 in the week ended September 21, below both the consensus estimate of 225,000 and the previous week’s revised figure of 222,000.
• The data supports the idea that the economy is holding steady, without the need for aggressive easing.
• Meanwhile, Fed speakers are trying to push more dovish rhetoric.
• Atlanta Fed President Raphael Bostic pointed out that a 50 basis point cut puts the central bank in a stronger position to deal with economic uncertainties.
• Similarly, Minneapolis Fed President Neel Kashkari pointed out that a higher rate cut gives the Fed more aggressive tools if inflation continues to fall.
• Chicago Fed President Austan Goolsbee echoed that sentiment, noting that a significant cut now gives the Fed more room to adjust if economic conditions worsen.
• Fed Governor Michele Bowman disagreed, favoring a more cautious cut of 25 basis points, reflecting concerns about moving too aggressively.

DXY Technical Outlook: DXY momentum reverses with continued bearish dominance

Technical analysis of the DXY index reveals that the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) indicators suggest bearish momentum, with the RSI remaining in negative territory and the MACD printing flat green bars. This indicates weak buying pressure and suggests continued bearish dominance.

Additionally, the strong resistance level at 101.00 limits upside potential for the US dollar. Key support levels include 100.50, 100.30 and 100.00, while resistance levels are located at 101.00, 101.30 and 101.60.