US Dollar sees slight uptick following Durable Goods Orders

• US Dollar rally is likely to continue, fueled by resilient US economy and higher US Treasury yields.
• Durable Goods Orders from March were solid.
• Hawkish bets on the Fed might also benefit the US Dollar.

The US Dollar Index (DXY) is trading mildly higher at 105.90, buoyed by high US yields amidst hawkish bets on the Federal Reserve (Fed). The US economy continues to display robust growth, which has forced markets to delay their expectations on rate cuts.

In the US, the Fed maintains a steady hawkish stance despite soft preliminary PMIs in April. Additionally, persistent high US Treasury yields due to heavy supply injection could further boost the US Dollar. The week’s highlight will be March’s Personal Consumption Expenditures (PCE) on Friday and Gross Domestic Product (GDP) preliminary readings from Q1 on Thursday.

Daily digest market movers: DXY holds gains after mid-tier data

• Durable Goods Orders reported a 2.6% increase in March, albeit with the previous surge of 1.3% significantly revised to 0.7%.
• Orders Excluding Transport posted a rise to 0.2%, reversing a revised decrease from 0.3% to just 0.1%.
• Fed’s present stance on monetary policy implies that easing expectations remain low and steady. The market forecasts low chances for a rate cut in the upcoming June meeting, while July sees a diminished likelihood at 45%. By September, a rate cut still isn't entirely anticipated with probabilities reduced to 90%.
• US Treasury bond yields showcase a mixed tendency. The two-year bond yield is seen at 4.93%, the 2-year yield at 4.66%, and the 10-year bond yield stands at 4.65%. Despite the mixed movement in yields on Wednesday, increasing US Treasury yields generally support Greenback strength.

DXY technical analysis: DXY bullish momentum continues flat, markets await direction

The indicators on the daily chart reflect a mixed scenario. The flat position of the Relative Strength Index (RSI) in positive territory indicates that the buying momentum is present but somewhat subdued as there seems no definitive direction. This suggests that bulls are exerting control but are struggling to gain further ground.

The decreasing green bars of the Moving Average Convergence Divergence (MACD) hint at slowing bullish momentum, making a potential transformative shift into bearish territory possible as the selling force starts to press forward.

However, the bigger picture is slightly more nuanced. Despite this sluggish bullish momentum in the short term, the DXY is currently trading above its 20,100 and 200-day Simple Moving Averages (SMAs). This not only points toward persistent buying pressure but also signals a more long-term bullish bias.