US Dollar Index: DXY stays depressed near 103.00 as downbeat US statistics test Fed hawks

• US Dollar Index holds lower grounds near 103.00 after unimpressive week-start.
• US ISM Manufacturing PMI joins downbeat PCE inflation, softer spending to prod hawkish Fed bets.
• US Independence Day holiday restricts DXY moves, key PMIs, Fed Minutes and NFP eyed.

US Dollar Index (DXY) remains on the back foot around 102.95, fading the late Monday’s corrective bounce, as markets seek fresh clues amid early Tuesday. In doing so, the greenback’s gauge versus six major currencies justifies the traders’ lack of confidence in the hawkish Fed bets amid recently downbeat US data. It’s worth noting that the US Independence Day holiday limits the DXY moves of late.

While extending Friday’s data disappointment, US ISM Manufacturing PMI for June dropped to the lowest level in three years, as well as stayed below the 50.0 level for the seventh consecutive month, as it marked 46.0 figure versus 47.2 expected and 46.9 prior. Further details reveal that the ISM Manufacturing Employment Index slid to a three-month low of 48.1 in June from 51.4 previous readings but the New Orders Index improved to 45.6 from 42.6 marked in May and 44.0 maket forecasts. Additionally, the ISM Manufacturing Prices Pair nosedived to the lowest since April 2020, to 41.8, during the said month from 44.2 previous readings. On a different page, S&P Global Manufacturing PMI for June confirmed 46.3 figure, the lowest in five months, whereas the Construction Spending improved 0.9% MoM for May, versus 0.5% expected and 0.4% previous readouts.

During the last week, the US Gross Domestic Product (GDP) and Durable Goods Orders improved but failed to gain support from the Fed’s preferred inflation gauge, namely the US Personal Consumption Expenditure (PCE) Price Index. Additionally, personal spending also eased and hence challenged the hawkish Fed bias, as well as the DXY bulls.

That said, the interest rate futures suggest 85% probability of witnessing 25 basis points (bps) of Fed rate hike in July. On the same line, Reuters said, “Futures markets had reflected rate cuts at the Fed's September meeting as recently as May, and are now projecting that the first cuts will come in January.” The market's hawkish Fed bets could be linked to the last week’s hawkish comments from the Federal Reserve Officials at the European Central Bank (ECB) Forum in Sintra.

Elsewhere, news that US Treasury Secretary Yellen had a 'frank and productive' discussion today with China's ambassador join the hopes of more easing from the People’s Bank of China (PBoC) to entertain traders.

Amid these plays, S&P500 Futures remain inactive after a mildly positive Wall Street performance. That said, the Treasury bond yields remain sidelined after an upbeat week-start move.

Technical analysis

Despite the latest retreat, the US Dollar Index (DXY) keeps the previous week’s upside break of the previous resistance line stretched from May 31, now support around 102.50. The same joins bullish MACD signals and steady RSI (14) to keep the buyers hopeful.