US Dollar struggles with mixed PCE figures and rate cuts bets

• US Dollar DXY struggling to rebound amid mixed PCE figures and anticipations of Fed cuts.
• Possibility of a rate cut by the Fed in September remains, though somewhat toned down.
• All eyes are now on next week’s FOMC decision.

On Friday, the US Dollar, as depicted by the DXY, displayed some resilience despite encountering daily losses post the release of mixed Personal Consumption Expenditures (PCE) data. The market continues to wrestle with the prospect of a rate cut in September by the Federal Reserve (Fed), even though expectations have somewhat softened.

Signs of disinflation in the US economy have begun to surface, thereby boosting confidence in a potential rate cut come September. Yet, Federal Reserve officials remain cautious and data-dependant so next week’s meeting will be crucial for the short-term market’s dynamics.

Daily digest market movers: US Dollar on shaky ground with mixed PCE data

• The annual core PCE, excluding volatile food and energy items, revealed a steady growth of 2.6%, contradicting economists' prediction of deceleration at 2.5%.
• The monthly core PCE inflation, the Fed's favored inflation tool, rose beyond the former and expected data of 0.1% to reach 0.2%.
• Though this higher growth pace is considered consistent, it falls short of dampening expectations that the Federal Reserve will roll out reduced interest rates by the September meeting, projecting two cuts this year.
• Next week’s Federal Open Market Committee (FOMC) will provide markets with additional guidance on the bank’s stance.

DXY Technical outlook: Bearish tendencies persist despite, index side-ways trade

Even though the DXY Index is battling to hold onto the 200-day Simple Moving Average (SMA), bearish signs continue to persist. The direction of the index thus now largely depends on whether the DXY can maintain the mentioned SMA but what likely is that the index might side-ways trade in the next sessions as indicators including the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) remain in negative zone but flattened.

Supports are noted at 104.15 and 104.00 levels, while resistances are observed at 104.30 and 104.50 levels.