Muted Markets on Monday

The US Dollar is under pressure on Monday as we begin with a quieter start to the week due to the bank holiday in the US and Canada. Last week, a sharp drop in US retail sales curtailed the initial rally we’d seen on the back of a set of hotter-than-forecast inflation figures. The first signs of weakness in the US economy that we’ve had in a while have seen traders taking profit on recent USD longs. While the Fed isn’t expected to cut rates in March, pricing is split for May with a cut fully priced in for June.

More US Data Due

Looking ahead this week we have plenty of US data to focus on with the FOMC minutes the headline release for the week. Traders will be keen to see the details of the last meeting in a view to establishing how strong the dovish skew is mong policymakers currently. Alongside that release, we also have the latest round of US PMI readings alongside a slew of Fed speakers over the week.

Two-Way Risks for USD

Given reaction to last week’s US retail sales readings, there is clearly some caution among bulls. If we see any further data weakness this week or any dovishness from Fed officials, this could well drive the current correction lower. On the other hand, any fresh upside in data should revive USD buying, as will any hawkish Fed commentary.

Technical Views

DXY

The Rally has stalled for now, with the index paused mid-channel, following the failure at 104.95. With momentum studies still bullish, focus remains on a further push higher while price holds above the 103.48 level keeping 105.91 above as a longer-run target.