- EUR/USD fluctuates below 1.0850 during US market holiday.
- The US Dollar Index (DXY) is likely to break below its near-term support at 101.75 amid positive market moods.
- Release of US PPI and retail sales provides a decisive move for future assets.
The EUR/USD pair is struggling to find direction as US markets close on Monday for Martin Luther King’s birthday. ) and the release of retail sales data is below 1.0840.
S&P 500 futures have recovered from losses after some early Asian selling pressure, indicating an improvement in investor risk appetite. The US Dollar Index (DXY) is likely to break below its near-term support at 101.75 amid positive market moods.
Last week, the US dollar index came under heavy pressure after the December consumer price index (CPI) slowed in the US. Going forward, the USD index may continue its downward trend for the long term as the Federal Reserve (Fed) considers a pause in policy tightening.
Economists at Wells Fargo believe the US dollar’s rally will end by early 2023 once monetary tightening ends. In fact, we believe the trade-weighted USD peak for the current cycle has already been reached. They predicted that the pace of the US dollar’s depreciation would become somewhat more pronounced in 2024 once the Fed begins cutting policy rates by early next year.
On Wednesday, investors will focus on the release of US Producer Price Index (PPI) data. The streets are anticipating a drop amid falling gas prices, and lower production costs are giving producers more room to cut factory prices. Also, the decline in retail demand will be offset by lower prices. Apart from that, the focus will be on retail sales data.
Meanwhile, Eurozone investors welcome Germany’s Gross Domestic Product (GDP) to expand by 1.9% on an annualized basis in 2022.