US Dollar declines after mixed data, Fed in sight

• Markets foresee a hawkish hold stance by the FOMC, influencing the DXY Index in the upcoming sessions.
• US Job Openings and ISM PMI figures reported on Wednesday came in weak.
• The session highlight will be Fed Chair Jerome Powell’s presser.

The US Dollar Index (DXY) is trading mildly lower on the day at 106.2 ahead of the highly-anticipated Federal Open Market Committee (FOMC) monetary policy decision. Markets are betting on a hawkish hold stance from the Federal Reserve (Fed), which could make investors adjust their expectations on interest rates. Earlier in the session, mixed data pushed the index down.

Overall, the US economy exhibits robust growth and persistent inflation, putting upward pressure on US yields, which acted as a tailwind for the Greenback in the last sessions. A hawkish Fed has created a favorable environment for the Dollar due to policy divergences against its peers.

Daily digest market movers: DXY mildly down as markets digest mid-tier data

• The US Bureau of Labor Statistics (BLS) announced the number of job openings on the last working day of March to be 8.488M, below the anticipated 8.690M mark.
• The US Manufacturing sector showed signs of contraction in April per the Institute for Supply Management (ISM) Manufacturing Purchasing Managers Index (PMI), registering a decline from the previous month.
• According to Automatic Data Processing (ADP), private sector jobs in the US increased by 192K in April, slightly surpassing the projected increase of 175K jobs.
• Although ADPreading surpassed expectations, was lower than March's 208K job gain, indicating a potential slowdown in employment growth.
• Regarding expectations for the next Fed meetings, the odds of a cut in June fell below 10%, dipped below 25% in July, and reduced to less than 55% in September.
• US Treasury bond yields are declining, with the 2-year yield at 5.01%, the 5-year yield at 4.70%, and the 10-year yield at 4.65%.

DXY technical analysis: DXY outlook remains neutral as markets await directions

The indicators on the DXY daily chart reflect conflicting signals. The Relative Strength Index (RSI), which is in positive territory, has a negative slope suggesting downward price momentum. The Moving Average Convergence Divergence (MACD) indicator, though showing flat red bars, is also indicating sell signals representing potential bearish sentiment.

However, this potential selling momentum has not yet translated into a definitive price trend, possibly due to market participants awaiting clearer directions. Yet, the fact that the US Dollar Index is comfortably situated above its 20, 100, and 200-day Simple Moving Averages (SMAs) signals that upward pressure is still in play, pointing toward a continued presence of buyers in the market.