US Dollar edges up, paring some losses from PMI data miss

• The US Dollar partly retraces its steps after its decline on Tuesday. 
• Markets are starting to brush off the miss on US PMI data. 
• The US Dollar Index heads back to 106.00 ahead of US Durable Goods data.

The US Dollar (USD) is trying to recover on Wednesday after trading firmly in the red on Tuesday. The miss on the US Purchasing Managers Index (PMI) for both the Services and Manufacturing sectors triggered a sell-off which extended to Wednesday’s Asian trading session. With the start of the European session, the dust seems to settle and seem to be considering the data miss as a one-off. Going forward, the US Gross Domestic Product (GDP) data on Thursday and the US Personal Consumption Expenditures (PCE) Price Index release on Friday will drive the next moves for the US Dollar. 

On the economic data front, Wednesday’s calendar is relatively light but some data could be moving markets and the DXY US Dollar Index again. Durable Goods Orders data are due to be released, and after the PMIs disappointment, more downbeat numbers could extend doubts over the US exceptionalism. Depending on how far data would undershoot or deteriorate, a June cut might even be back on the table again by next week. 

Daily digest market movers: Durable Goods to the rescue

• The Indonesian Central Bank has raised its key policy rate from 6.00% to 6.25% while markets were looking for a hold or a rate cut.
• Chinese building conglomerate Country Garden has extended all its Yuan Bonds in order to avoid a local default.
• The US Senate has passed a $95 billion aid package for Ukraine, Israel and Taiwan.
• USD/JPY is ticking up again to 154.90, making a new multi-decade high. Bank of America has warned in a report on Wednesday that a forex intervention might be nearby. 
• At 11:00 GMT, the weekly Mortgage Bankers Application Index will be released. Last week, the index surged by 3.3%, with no forecast pencilled in.
• At 12:30 GMT, the preliminary Durable Goods print for March will be released:
  • Headline orders grew by 1.3% in February, with no forecast for March..
  • Orders without transportation, a widely followed indicator by markets, are expected to increase at a steady rate of 0.3%.
• The US Treasury is heading to markets to allocate a 5-year Note.  
• It is another green day in equity markets, with Asian indexes broadly up by 2% and both European equities and US indices futures up by 0.50%.
• The CME Fedwatch Tool suggests June will still be a no-change to the monetary policy rate for the Federal Reserve by 84.8%, with September bearing a 46.7% probability for a rate cut against 31.6% for unchanged. 
• The benchmark 10-year US Treasury Note trades around 4.62%, near the low for this week.

US Dollar Index Technical Analysis: One drop on a hot plate

The US Dollar Index’s (DXY) recent rally broadly comes from the staggering US economy, which has been relentlessly printing positive economic numbers. Tuesday’s PMI numbers came in below estimates for the first time since last year, but investors seem to be taking this miss as a one-off rather than a sudden shock. Markets will want to await further confirmation in the data points from this week and possibly even next week before heading back to pricing in a rate cut for June. 

On the upside, first 105.88 (a pivotal level since March 2023) needs to be recovered again before targeting the high of April 16 at 106.52. Further up and above the 107.00 round level, the DXY Index could meet resistance at 107.35, the October 3 high. 

On the downside, 105.12 and 104.60 should also act as support ahead of the 55-day and the 200-day Simple Moving Averages (SMAs) at 104.35 and 104.05, respectively. If those two are unable to catch the falling knife price action, the 100-day SMA near 103.70 is the next best candidate.