US Dollar modestly retreats after disappointing Jobless Claims data

• US Dollar faces pressure post the release of disappointing Initial Jobless Claims, amplifying fears regarding the US labor market's health. 
• Markets look toward ongoing data for clearer direction, the Fed's hawkish stance could change with continued releases of soft data.
• All eyes are now on next week’s CPI data.

The US Dollar Index (DXY) is trading at 105.35, slightly down. Despite signals of persistently high inflation acknowledged by Federal Reserve (Fed) Chair Jerome Powell and a recent hawkish stance from the Fed, the Dollar seems to be under mild downward pressure on Thursday due to the report of weak Initial Jobless Claims figures

While the US economy is grappling with sustained inflation and mixed signals from its economic activity, Fed Chair Jerome Powell hinted that cuts might be delayed. As for now, the recent weak Nonfarm Payrolls report did not convince Fed officials, who remain hawkish. The USD dynamics will be set by the incoming data and how the central bank’s members take it.

Daily digest market movers: DXY struggles with Initial Jobless Claims data weighing, Fed officials continue to impact market expectations

• US Dollar weakened after heavier-than-anticipated Initial Jobless Claims data, marking 231K applications, overshooting 210K forecast and increased jobless claims underscore anxiety over potential labor market weakness in the US.
• Lack of significant US economic data this week turns investor focus on Fed speakers, which continues attaching to the Fed rhetoric with a slight hawkish twist.
• Upcoming week’s Producer and Consumer inflation data will be crucial, where higher-than-projected figures could minimize rate cut probabilities this year.
• While Fed officers maintain caution against rate cuts, the market predicts 10% chance of a June rate cut, 33% in July, 85% in September, and have already priced in November’s cut.

DXY technical analysis: DXY bulls get stuck below the 20-day SMA

The daily Relative Strength Index (RSI) is on a negative slope, although in positive territory. This indicates that the current buying momentum is losing strength, while the Moving Average Convergence Divergence (MACD) printing flat red bars suggests short-term bearish momentum. Since the MACD remains flat, however, this also indicates a lack of strong selling pressure for now.

Regarding its Simple Moving Averages (SMAs), the DXY is below the 20-day SMA, hinting at a short-term bearish bias. However, it maintains a position above the 100 and 200-day SMAs, which typically denote a longer-term bullish trend. This suggests that the bulls retain control over the broader trend, despite recent setbacks.