US Dollar clings to gains to start important week


  • US Dollar stays resilient against its rivals at the beginning of the week. 
  • US Dollar Index trades at multi-week highs following last week's rally.
  • Hawkish Fed bets continue to provide a boost to US Dollar.

The US Dollar (USD) preserves its strength to start the new week despite subdued trading action amid the Memorial Day holiday in the United States (US). The US Dollar Index (DXY), which tracks the USD's performance against a basket of six major currencies, holds steady above 104.00 after having gained 1% last week. 

Following the latest upbeat macroeconomic data releases from the US, investors reassess the Fed's policy outlook and now see a stronger chance of the US central bank raising the key interest rate one more time in June. In turn, the USD continues to find demand on the back of rising US Treasury bond yields.

In the second half of the week, the ISM Manufacturing PMI, ADP Employment Change and the US Bureau of Labor Statistics' May jobs report will be watched closely by market participants. 

Daily digest market movers: US Dollar keeps its footing on Monday

  • The US Bureau of Economic Analysis (BEA) reported on Friday that inflation in the US, as measured by the change in Personal Consumption Expenditures (PCE) Price Index, rose to 4.4% on a yearly basis in April from 4.2% in March.
  • The annual Core PCE Price Index, the Fed's preferred gauge of inflation, edged higher to 4.6%, compared to the market expectation of 4.6%. 
  • Further details of the BEA's publication showed that Personal Income increased 0.4% on a monthly basis while Personal Spending rose 0.8%.
  • Cleveland Fed President Loretta Mester told CNBC on Friday that PCE Price Index data underscore the slow progress on inflation. "It's important for the Fed not to under tighten the monetary policy," Mester added.
  • According to the CME Group FedWatch Tool, markets are currently pricing in a less than 40% probability of the Fed leaving its policy rate unchanged at the upcoming meeting.
  • On Sunday, US President Joe Biden and Republican House Speaker Kevin McCarthy reached an agreement to temporarily suspend the debt-limit to avoid a US debt default. The House of Representatives and Senate still need to approve the deal, which will suspend the $31.4 trillion debt-ceiling until January 1, 2025, in coming days. 
  • Bond and stock markets in the US will remain closed on Monday.
  • On Tuesday, the Conference Board will release the Consumer Confidence Index data for May.

Technical analysis: US Dollar Index stabilizes above key support

The Relative Strength Index (RSI) indicator on the daily chart stays near 70, suggesting that the US Dollar Index (DXY) could turn technically overbought in the near term. In case DXY stages a technical correction, 104.00 (Fibonacci 23.6% retracement of the November-February downtrend) aligns as key support. A daily close below that level could attract USD sellers and open the door for an extended slide toward 103.00, where the 100-day Simple Moving Average (SMA) is located.

If DXY continues to use 104.00 as support, buyers are likely to remain interested. Additionally, the bullish cross seen in the 20-day and the 50-day SMAs points to a build-up of momentum. On the upside, 105.00 (psychological level, static level) aligns as next resistance before 105.60 (200-day SMA, Fibonacci 38.2% retracement).

What is US Dollar Index (DXY)?

The US Dollar Index, also known as DXY or USDX, is a benchmark index that was established by the US Federal Reserve in 1973. DXY is widely used as a tool measuring the US Dollar (USD) value in global markets. The index is calculated by measuring the US Dollar’s performance against a basket of six foreign currencies, the Euro, the Japanese Yen (JPY), Swedish Krona (SEK), the British Pound (GBP), the Swiss Franc (CHF) and the Canadian Dollar (CAD).

With 57.6%, the Euro has the biggest weight in the index followed by the JPY (13.6%), GBP (11.9%), CAD (9.1%), SEK (4.2%), and CHF (3.6%). Hence, a sharp decline in the EUR/USD pair could help the US Dollar Index rise even if the US Dollar weakens against some of the other currencies in the basket. 

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended content

Editors’ Picks

AUD/USD recovers to 0.6300 amid strong Aussie jobs data, Trump's trade talks

AUD/USD recovers to 0.6300 amid strong Aussie jobs data, Trump's trade talks

AUD/USD has found fresh buyers and reverts to near 0.6350 in Thursday's Asian trading. The pair stays supported by strong Australian jobs data and fresh comments from US President Trump on a likely trade deal with China. However, deteriorating risk sentiment could limit its upside. 

AUD/USD News
USD/JPY hangs near fresh YTD low amid rising BoJ rate hike bets

USD/JPY hangs near fresh YTD low amid rising BoJ rate hike bets

USD/JPY holds near fresh YTD lows of 150.46 early Thursday. BoJ's rate hike plan continues to push JGB yields higher, further underpinning the Japanese Yen. Markets weigh renewed US tariff talks, keeping the downside intact in the pair. US jobs data and Fedspeak are next in focus. 

USD/JPY News
Gold price eyes fresh record highs and counting

Gold price eyes fresh record highs and counting

Gold price enters a bullish consolidation phase as Trump’s tariffs affect risk sentiment. US Dollar struggles to hold ground despite hawkish Fed Minutes as US Treasury yields decline weighs. Now gold price awaits acceptance above $2,950 as the daily technical setup favors buyers.

Gold News
Crypto Today: Litecoin, Binance, and Solana dominate headlines as BTC reclaims $97K

Crypto Today: Litecoin, Binance, and Solana dominate headlines as BTC reclaims $97K

The global cryptocurrency market halted a rut of 3 consecutive losing days, gaining 1.6% to hit $3.13 trillion on Wednesday, Bitcoin price promptly reclaimed the $97,000 territory, rebounding 4% from the 15-day low of $93,388 recorded on Tuesday.

Read more
Money market outlook 2025: Trends and dynamics in the Eurozone, US, and UK

Money market outlook 2025: Trends and dynamics in the Eurozone, US, and UK

We delve into the world of money market funds. Distinct dynamics are at play in the US, eurozone, and UK. In the US, repo rates are more attractive, and bills are expected to appreciate. It's also worth noting that the Fed might cut rates more than anticipated, similar to the UK. In the eurozone, unsecured rates remain elevated.

Read more
The Best brokers to trade EUR/USD

The Best brokers to trade EUR/USD

SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.

Read More

Forex MAJORS

Cryptocurrencies

Signatures

Best Brokers of 2025