US Dollar selloff continues ahead of US GDP report

• The US Dollar continued to weaken against its major rivals on Thursday.
• The US Dollar Index dropped to its lowest level in a week below 101.00.
• US Gross Domestic Product (GDP) data could drive USD's valuation in the second half of the day.

The US Dollar stays under persistent selling pressure on Thursday as risk flows dominate the financial markets following the Federal Reserve's policy announcements on Thursday. The USD index – which tracks the USD's valuation against a basket of six major currencies – dropped to its lowest level in a week below 101.00 in the European session, reflecting the broad-based USD weakness.

The US Bureau of Economic Analysis will release the first estimate of the second-quarter Gross Domestic Product (GDP) growth, which is forecast to show an annual expansion of 1.8% following the 2% growth recorded in the first quarter. The US Census Bureau will publish Durable Goods Orders data for June and the US Department of Labor will release the weekly Initial Jobless Claims data.   

Daily digest market movers: US Dollar suffers losses after Fed July meeting

• The Fed raised its policy rate by 25 basis points (bps) to the range of 5.25%-5.5% following the July policy meeting as expected. The Fed made little adjustments to the policy statement from June and the publication failed to trigger a market reaction. In the post-meeting press conference, Powell's cautious comments on further policy tightening caused the USD to come under renewed selling pressure.
• Powell refrained from confirming another rate hike this year and said that every policy meeting will be live. "If we see inflation coming down credibly, we can move down to a neutral level and then below neutral at some point," Powell told reporters and noted that the policy was already restrictive. 
• Commenting on the Fed event, "Fed Chair Jerome Powell refused to give forward guidance and stressed the importance of data. The bank will make decisions on a meeting-by-meeting basis. While it upgraded its comments on the economy – moderate instead of modest growth – it sees expansion as a good thing," said FXStreet Analyst Yohay Elam. "Regarding the burning topic of inflation, the Fed is holding off the champagne bottles, saying the latest report could be a one off. Nevertheless, it sees current policy as restrictive. "
• According to the CME Group FedWatch Tool, the probability of one more rate increase this year is less than 30%.
• Wall Street's main indexes registered small losses on Wednesday. US stock index futures trade in positive territory early Thursday, with Nasdaq Futures leading the risk rally with a gain of more than 1%.
• Consumer sentiment in the US continued to improve in July, with the Conference Board's Consumer Confidence Index rising to 117.0 from 110.1 (revised from 109.7) in June.
• Further details of the publication showed that the Present Situation Index climbed to 160.0 from 155.3 and the Consumer Expectations Index advanced to 88.3 from 80. 
• The benchmark 10-year US Treasury bond yield holds above 3.85% following Wednesday's pullback.
• US S&P Global Manufacturing PMI improved to 49.0 in July's flash estimate from 46.3 in June. Services PMI edged lower to 52.4 from 54.4 in the same period. Finally, Composite PMI declined to 52.0 from 53.2, pointing to an ongoing expansion in the private sector's business activity, albeit at a softening pace.
• Commenting on PMI surveys' findings, "July is seeing an unwelcome combination of slower economic growth, weaker job creation, gloomier business confidence and sticky inflation," said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence. "The overall rate of output growth, measured across manufacturing and services, is consistent with GDP expanding at an annualized quarterly rate of approximately 1.5% at the start of the third quarter," he added.

Technical analysis: US Dollar Index turns bearish as key support fails

The US Dollar Index (DXY) broke below 101.00 (static level, psychological level) and the Relative Strength Index (RSI) indicator on the daily chart dropped to 40, pointing to a buildup of bearish momentum. On the downside, 100.50 (static level) aligns as immediate support before 100.00 (psychological level, static level) and 99.60 (multi-year low set on July 18).

In case DXY rises above 101.00 and starts using that level as support, it could stage a rebound toward 101.40 (20-day SMA). A daily close above that level could open the door for an extended recovery toward 102.00 (static level, former support) and 102.50-102.60 (50-day SMA, 100-day SMA).