US Dollar rides high on rising treasury yields despite weak data

US Dollar gets a boost from an increase in US Treasury yields on Thursday.
Markets still show signs of caution as Fed officials express a conservative stance on embracing easing cycles.
The mixed US economic outlook tempers upside in the Greenback.

On Thursday, the US Dollar, as gauged by the Dollar Index (DXY), saw significant strength on the back of rising US Treasury yields. This follows a dip midweek as market participants analyzed several recently released mid-tier data releases, including soft Retail Sales figures from May. On Thursday, the USD shrugged off weak labor and housing data.

In regard to the US economic outlook, while there are signs of disinflation, Federal Reserve (Fed) officials’ measured comments are keeping the market’s expectations in check. If the mixed signals from the economy persist, it could potentially hinder further USD strength.

Daily digest market movers: US Dollar gains despite weak data

Building Permits declined from 1.44 million to 1.386 million, a dip below predictions.
In addition, Housing Starts also decreased, moving from 1.352 million to 1.277 million, missing optimistic estimates.
Initial Jobless Claims recorded a slight drop, trending from a revised 243K to 238K. Continuing Jobless Claims saw an increase from 1.813 million to 1.828 million.
Philadelphia Fed Manufacturing Survey for June disappointed, posting a 1.3 instead of the projected 5, down from the previous 4.5.
Minneapolis Fed President Neel Kashkari noted that returning inflation to the 2% target could take one to two years since current wage growth still outpaces the desired rate.
Chances of an interest rate cut remain at about 67% for the upcoming Fed meeting on September 18, according to the CME Group’s FedWatch Tool.
US Treasury yields saw a considerable rise, with gains exceeding 1%. The 2-year, 5-year and 10-year rates stood at 4.74%, 4.29%, and 4.27%, respectively.

DXY technical analysis: Bullish sentiment gains traction, must recover 105.50

Technical indicators for Thursday’s session showed renewed bullish momentum bolstered by increased US Treasury yields. The Relative Strength Index (RSI) held above 50, with a prevailing green histogram in the Moving Average Convergence Divergence (MACD), indicating sustained bullish sentiment.

Additionally, the DXY Index maintains above its 20-day, 100-day and 200-day Simple Moving Averages (SMA). This, combined with the rising indicators, suggests the potential for additional gains in the US Dollar. Yet, given the mixed economic outlook, investors should remain attentive to changes in the market landscape.