US Dollar set for mildly positive weekly close, extending month-long consolidation

• The US Dollar trades flat ahead of last data points for this week. 
• Markets brace for no less than six Fed speakers and the release of the Monetary Policy report. 
• The US Dollar Index orbits around 104.00, unable to break away in either way.

The US Dollar (USD) is flat in the European trading session as markets brace for the last economic data releases for the week. Looking back at this week, it becomes clear that markets are still clueless about what to do next. The US Federal Reserve says it remains data dependent, and recent data could build a case for one more rate hike in order to control the second-round effects of inflation. Meanwhile, Fed speakers are pushing back this narrative, and comments this week were all about when and how many interest-rate cuts the Fed will perform. 

On the economic front, some last numbers could still trigger a move in the US Dollar. Friday’s calendar features the Manufacturing Purchasing Managers Index (PMI) releases from both S&P Global and the Institute for Supply Management for February, as well as the University of Michigan Consumer Sentiment and Inflation Expectations data. To top it off, six Fed speakers and the release of the Monetary Policy Report will deliver more guidance to the markets. 

Daily digest market movers: Divergence taking place

• This Friday is set to kick off near 14:45 GMT, with the final reading of the S&P Global Manufacturing PMI for February. Expectations are for an unchanged reading at 51.5.
• At 15:00 GMT, both the University of Michigan and the Institute for Supply Management (ISM) will release its data:
  • For the final February reading from the University of Michigan:
    • Consumer Sentiment is expected to remain unchanged at 79.6.
    • The Inflation expectations were in the preliminary number at 2.9%. There is no forecast available for the final reading.
  • The ISM PMI data release will contain the following elements:
    • The headline Manufacturing PMI is seen increasing from 49.1 to 49.5.
    • The Manufacturing Employment subcomponent was previously at 47.1. No forecast is available.
    • The New Orders Index was at 52.5, with no forecast available.
    • The Prices Paid Index is expected to tick up from 52.9 to 53.0.
• The Federal Reserve has its own schedule this Friday:
  • Fed Board of Governors member Christopher Waller and Dallas Fed President Lorie Logan are set to participate in a panel at 15:15 GMT.
  • Raphael Bostic, head of the Atlanta Fed, is due to speak at 17:15 GMT.
  • San Francisco Fed President Mary Daly and Federal Reserve Bank of Kansas City President Jeffrey Schmid will participate in a panel discussion at 18:30 GMT.
  • Fed Board of Governors member Adriana Kugler will speak at around 20:30 GMT.
  • At 16:00 GMT, the Fed will release its Monetary Policy Report which will be sent to Congress before the semi-annual hearings take place next week. 
• Equities are in the green across the board from Asia to US futures. During the Asian trading session, Nasdaq futures have already hit an all-time high. 
• According to the CME Group’s FedWatch Tool, expectations for a Fed pause in the March 20 meeting are at 97%, while chances of a rate cut stand at 3%. 
• The benchmark 10-year US Treasury Note trades around 4.27%, broadly unchanged for the past three days. 

US Dollar Index Technical Analysis: 104.00 as magnet

The US Dollar Index (DXY) has not moved much and is set to close the week with a minor gain. The divergence between Fed speakers commenting on Fed rate cuts and recent inflation data opening the possibility of another rate hike is creating a vacuum in which the US Dollar is unable to move. It looks like traders will keep their powder dry until next week, when the  US Jobs Report will be released and Fed’s Chairman Jerome Powell will testify in Congress. 

To the upside, the 100-day Simple Moving Average (SMA) near 103.97 has been broken for now and should not see a retest anywhere later this Friday. Should the US Dollar be able to cross 104.60, 105.12 is the next key level to keep an eye on. One step beyond there comes 105.88, the high from November 2023. Ultimately, 107.20 – the high of 2023 – could come back into scope. 

Looking down, the 200-day Simple Moving Average at 103.74 has been broken twice recently, making it a weak support. The 200-day SMA should not let go that easily though, so a small retreat back to that level could be more than granted. Ultimately, should it lose its force, prices could fall to 103.16, the 55-day SMA, before testing 103.00.