USDIDX fall 📉 Dollar index near key support level

Yesterday's macro data from the US, i.e. a sharp drop in the Conference Board consumer confidence index (despite an expected increase) and weaker Chicago PMI and Fed Richmond readings, along with Moody's rating agency forecasts, increased downward pressure on the US dollar. USDIDX continues its corrective move and the sell-off has swelled in strength.

The weaker data supported market sentiment along the lines of 'the worse, the better' and suggests that despite the recent series of surprisingly positive readings from the US economy - it may be hard for it to repeat such great results in the face of the ongoing monetary tightening cycle and faltering, inflation-stricken consumers. According to Moody's, current forecasts point to a 1% decline in real GDP in the U.S. in both the third and fourth quarters of 2023, and the economy could be stuck in a 'tailspin' this year as the second, weaker half of the year offsets the slight upward trend seen in the first half of the year. The question, however, is how long stock market bulls will be able to celebrate an eventual less hawkish Fed tightening cycle during an economic slowdown, which could cause corporate margins and revenues to shrink. The market once again has the hope that the Fed will not be overly hawkish, although markets still see more than a 26% chance of a 50 bp rate hike in March.

USDIDX on the H1 interval has slipped below the 100-session average, and a test of the key 104,200 support zone, set by the SMA200 (red line), seems likely for this moment. A fall below could open the way for the dollar index to reach levels near 103 points. 

Source: xStation5