US Dollar weak after soft CPI figures from July

USD marks a slight decline as lower US inflation further dulls its attractiveness.
Softer but in-line CPI figures give markets reason to feed on dovish narrative.
Markets still anticipate the first rate cut in September.

The US Dollar (USD), gauged by the US Dollar Index (DXY), showed a slight downtrend below the 103.00 threshold during Wednesday’s trading session. This decrease follows the confirmation of cooler-than-expected inflation in the US, which somewhat overshadowed the stable outlook of the country’s labor market.

While the market expectations regarding the upcoming decisions on monetary policy didn’t change substantially, the projection of the US economic trend still points toward a growth rate above the trend. This pattern suggests that the market might again be overpricing the need for aggressive monetary easing in the future.

Daily digest market movers: Lower US inflation dampens US Dollar’s appeal

The decrease in US inflation, as gauged by the Consumer Price Index (CPI), was a main decider of the day’s market dynamics.
Headline CPI decelerated to 2.9% on a YoY basis in July from June’s level of 3%, slightly below the market expectations.
Core CPI (which excludes the fluctuating food and energy prices) stood at 3.2% YoY, an increase from 3.3% seen in July, aligning with the market predictions.
The possibility of a cut by the Federal Reserve (Fed) in September stands at around 80%.
These future easing probabilities will be highly dependent on other economic indicators.

DXY technical outlook: Bearish outlook steady, indicators deep in negative terrain

The technical indicators of DXY point to a persisting bearish market situation with buyers failing to generate a significant uptick. The index continues to anchor below the 20,100 and 200-day Simple Moving Averages (SMA), reinforcing the dominant bearish sentiment.

The Relative Strength Index (RSI), remains near 30, indicating steady selling pressure. On the other hand, the Moving Average Convergence Divergence (MACD) stabilizes, all the while remaining in negative territory with low, red bars.

Support Levels: 102.40, 102.20, 102.00

Resistance Levels: 103.00, 103.50, 104.00