US Dollar down while investors await Powell's direcitons

• USD is pressured by a pullback in US Treasury yields due to anticipated clarity on the Fed's policy.
• Fed officials express concern over potential easing with the US economy growing above trend.
• Investors await Powell’s remarks at the Jackson Hole Symposium on Thursday.

On Monday, the US Dollar (USD), measured by the US Dollar Index (DXY), declined to its lowest level since January around 102.20 following a pullback in US Treasury yields. Market participants are awaiting clarity on the Federal Reserve's (Fed) policy outlook.

Despite the modest setback, the US economy indicates sustained progress above trend, which suggests the market may be overestimating aggressive future easing.

Daily digest market movers: US Dollar weakens as market anticipates strong Fed easing

• DXY Index is expected to weaken in the short term due to the market's perception that the Fed is set to relax monetary policy in light of recent data indicating an economic slowdown.
• July Retail Sales report showed a stronger-than-expected rise, signaling resilient consumer spending and suggesting the US economy may not be as weak as feared.
• The robust labor market continues to drive wage increases, supporting consumer spending and suggesting no immediate recession threat.
• This suggests that the market seems to be overestimating the Fed, and that might get a surprise if the bank delays the cutting cycle.
• On Thursday and Friday, Fed Chair Jerome Powell will be on the wires at the Jackson Hole Symposium, where markets will look for clues regarding the next steps.

DXY technical outlook: A weakening bias persists and DXY loses key support

The technical indicators for the DXY Index are consolidating, albeit in negative territory, reflecting subdued price action with the Relative Strength Index (RSI) down deeply near 30. The Moving Average Convergence Divergence (MACD) bars appear to be growing red, suggesting consistent selling pressure. The index break signals the end of sideways trading in the 102.50-103.30 channel, which strengthens selling arguments.

Support Levels: 102.20, 102.00, 101.80

Resistance Levels: 103.00, 103.50, 104.00