US Dollar battles losses following disappointing ISM Services data

• The DXY Index is significantly lower, near 103.65, on Tuesday.
• The ISM Services PMI from February reflected lower-than-expected figures.
• The focus now turns to labor market data.

The US Dollar Index (DXY) is trading around 103.65, losing some ground. The causes for these latest movements are primarily focused on February's Purchasing Managers Index (PMI) report on the Services sector from the Institute for Supply Management (ISM), which came in lower than expected. If markets start to fear an economic slowdown, they may start to bet on a less aggressive Federal Reserve (Fed). 

Despite some evidence of softness in the US economy, it is showing resilience overall. This is making investors confident that the Fed will start easing in June, which may provide a cushion to the US Dollar’s losses. The labor market data set to be released this week will be key to shaping those expectations.

Daily digest market movers: DXY loses some ground on weak data, hawkish bets on the Fed cooldown

• The ISM Services PMI for February, reported by the Institute for Supply Management, is 52.6, which fell short of the expected 53 but is fairly steady compared to January's 53.4 
• An 80% probability of an interest rate reduction in June is being anticipated by the markets, which means a decrease from 100% at the end of the previous week.
• US Treasury bond yields are on the decline with 2-year yields trading at 4.56%, while the 5-year yields, and 10-year yields at 4.15%.
• Labor data reports to be released this week include February’s Nonfarm Payrolls, Average Hourly Earnings and the Unemployment Rate, all of which are closely followed by the Fed.
• The outcome of labor market metrics will shape the dynamics of the Greenback for the near term.

DXY technical analysis: DXY bears gain ground, conquer 200-day SMA

The Relative Strength Index (RSI) presently occupying negative territory with a negative slope supports the idea of bears’ wielding strength. This suggests that bears maintain a strong hand at this juncture. Likewise, the Moving Average Convergence Divergence (MACD) registers rising red bars, bolstering the narrative that selling momentum currently prevails. 

Assessing the position of the index concerning its Simple Moving Averages (SMAs), it is now trading below the 20, 100 and 200-day SMAs, which suggests that unless the buyers make a move, the outlook has turned negative.