Dollar Slumps Amid Weak U.S. Data

Key Takeaways:

*Disappointing U.S. Data: Core Retail Sales and PPI both missed expectations, reinforcing concerns of economic slowdown following prolonged trade tensions.

*Inflation Remains Muted: CPI and inflation figures continue to underperform forecasts, easing concerns over supply-driven price shocks.

*Fed Policy Uncertainty: Jerome Powell reiterated a data-dependent approach, signaling no clear rate path amid conflicting inflation-growth dynamics.

*Dollar Weakness Builds: Dovish Fed expectations and economic softness push the Dollar Index closer to key support at 100.30.

Market Summary:

The Dollar Index, which measures the greenback’s performance against a basket of six major currencies, continued to trend lower as a series of downbeat U.S. economic data releases dented investor confidence. Following the softer-than-expected Consumer Price Index (CPI), both Core Retail Sales and the Producer Price Index (PPI) missed market expectations, reinforcing concerns that earlier trade tensions have had a lingering impact on U.S. economic momentum. Notably, inflation remains subdued despite previous fears of supply-driven price pressures, further reducing the urgency for the Federal Reserve to tighten monetary policy.

The string of disappointing data has strengthened market speculation that the Fed could adopt a more accommodative stance in the near term. However, Fed Chair Jerome Powell offered no definitive signal on the long-term policy trajectory during his latest speech. He emphasized the central bank’s continued data dependence and flagged a potential policy dilemma: balancing the need to contain inflation while also supporting slowing economic growth. With ongoing uncertainty surrounding the full economic impact of tariffs and trade disruptions, Powell’s cautious tone added to the dollar’s bearish pressure.

Technical Analysis

Dollar Index, H4

Technically, the Dollar Index remains on the defensive, currently hovering near a key support level of 100.30. The MACD indicator shows increasing bearish momentum, while the RSI stands at 46, indicating further downside potential. 

A decisive break below 100.30 could open the door toward the next support level at 99.15. However, failure to breach this level may see the index consolidate around current levels before the next directional moves.

Resistance levels: 101.90, 103.40
Support levels: 100.30, 99.15