US Dollar Index faces selling pressure at 20-day moving average despite strong Durable Goods Orders

• DXY Index is trading at 104.7, showcasing 0.35% losses.
• Durable Good orders from the US came in higher than expected but didn’t trigger movement from Greenback.
• Fed maintains cautious stance on premature easing, hinting at lower chances for swift interest rate cuts which cushions the USD.

The US Dollar Index (DXY) is currently trading at 104.7, experiencing some losses despite positive indications from the economy. This week, the US reported robust domestic economic indicators, such as the rising preliminary May PMIs reported by S&P Global, along with strong Durable Goods Orders and Jobless Claims figures, which suggest a potential continuation of the US Dollar's recovery. Despite these fundamentals, the DXY Index faces resistance at the 20-day Simple Moving Average and feels the effects of selling pressure.

As the US economy displays robust indicators, the Federal Reserve's (Fed) cautious stance on premature easing will limit any downward movement. Next week, April Personal Consumption Expenditures (PCE), the Fed's preferred gauge of inflation, will be released and might change the stance of the central bank’s messaging.

Daily digest market movers: DXY sees red despite signs of economic resilience in the US

• Durable Goods Orders in the US increased by 0.7% in April after March’s figures were revised down steeply to 0.8%. April’s reading exceeded market predictions, which expected a drop of 0.8%.
• Excluding transportation, a 0.4% rise was recorded in new orders. With defense set aside, new orders stayed almost unchanged.
• Fed remains mindful of premature easing with Fed members implying that the policy rate limitation will continue for a prolonged period. Market probabilities for a rate cut in the upcoming meetings are around 50% in September and 85% in November, with a cut priced in by December.

DXY technical analysis: DXY faces strong resistance at 20-day SMA

The DXY's technical outlook paints a mixed picture. The Relative Strength Index (RSI) is sloping downward within negative territory, hinting that selling momentum is underway. This negative slope implies bears gaining an upper hand in the short term. The Moving Average Convergence Divergence (MACD) displays flat red bars, which indicate steady buying pressure, adding more color to the bearish narrative.

Bulls, despite struggling, show their resilience as the DXY is clinging above the 100 and 200-day Simple Moving Averages (SMAs). This position above long-term averages indicates an underlying bullish bias. However, as long as it remains below the 20-day SMA, the short-term outlook will be painted with red.