US Dollar bulls struggle to gain further ground, losses limited by resilient economy

• The US Dollar Index showed some gains on Thursday, jumping to 104.10 and then stabilized at 104.00.
• February’s S&P PMIs came in mixed, while weekly Jobless Claims came in better than expected.
• Strong labor market figures may push the Fed to remain hawkish.

The US Dollar Index (DXY) saw a slight upswing to 104.10 in Thursday’s session following the release of mixed economic activity data and positive labor market figures but during the American session, it gave up gains at retreated to 104.00. 

Meanwhile, the US Federal Reserve continues to adopt a firm approach, showing little interest in reducing interest rates soon and emphasizing the importance of maintaining rates at levels that restrict economic overheating. Market sentiments are increasingly in agreement with this perspective, solidifying the anticipation that any relaxation in monetary policy will be postponed, which may limit the US Dollar’s losses. 

Daily digest market movers: The US Dollar holds mild gains as markets digest US data

• The S&P Global Composite PMI in the US decreased to 51.4 in February from 52 in January, indicating a slower expansion of business activity in the private sector.
• S&P Global Manufacturing PMI saw an increase to 51.5 from 50.7, signaling a slight improvement in manufacturing sector growth.
• The Services PMI from S&P Global dropped to 51.3 from 52.5, reflecting a reduction in the pace of expansion within the services sector.
• Initial Jobless Claims for the week ending February 16 came in at 201K, lower than the 218K consensus.
• Market expectation for the next Fed meeting in March suggests that markets are pricing in a hold, while the odds of a cut also remain low for the May meeting.
• Markets are now pushing the start of interest rate easing to June.

Technical analysis: DXY bulls struggle to gain further ground and remain below the 100-day SMA

The indicators on the DXY daily chart reflect a mixed picture. The Relative Strength Index (RSI) exhibits a flat slope yet remains in positive territory This suggests that although the buying momentum has slowed down recently, the overall uptrend has not been completely undermined. 

Concurrently, the Moving Average Convergence Divergence (MACD) displays red bars, which is another indication of rising selling momentum. This denotes a possible shift toward a sideways trading phase or even a slight bearish reversal.

In the larger context, the DXY Index is trading above the 20-day Simple Moving Average (SMA) and 200-day SMA but below the 100-day SMA. This highlights that the bulls maintain some dominance, defying recent bearish pressure. However, the Dollar Index’s position under the 100-day SMA signals a potential short-term trepidation among buyers.

Despite the bulls struggling to gain ground, the overall trend appears to still be in favor of buyers, albeit that increasing bearish signals should not be ignored. Hence, the short-term technical outlook seems to be cautiously bullish, with potential periods of consolidation or minor corrections on the horizon.