US Dollar halts its rally weakened by soft ISM PMIs

NEW YORK (April 3) The US Dollar Index (DXY) is currently trading at 104.3, reflecting a daily decline. Despite the Federal Reserve's (Fed) cautious stance, consensus forecasts indicate that the beginning of the easing cycle will begin in June. That being said, mixed data from the US economy may make Fed officials think twice about rushing to start cutting.

The US labor market remains resilient as well as the overall economy, with little signs of a slowdown. In case the economy doesn’t show conclusive evidence of cooling down, the Fed might consider delaying the start of the easing cycle.

Daily digest market movers: DXY impacted by service sector slowdown, Fed remains cautious

• The Institute for Supply Management (ISM) released a report noting that business activity in the US service sector expanded in March, but growth was slower than the previous month. The ISM Services Purchasing Managers Index (PMI) decreased to 51.4 from February's 52.6. 
• The reported YoY decrease in the Prices Paid Index from 58.6 to 53.4 suggests an overall declining trend in inflation.
• The Employment Index noted a slight yearly increase, up to 48.5 from an earlier 48.0, continuing to signify a decline in payrolls within the service sector. 
• Data from Automatic Data Processing (ADP) showed private sector employment in the US increased in March with 184,000 new jobs, which was an improvement upon the revised February figures of 155,000 from 140,000.
• Cleveland Fed President Loretta Mester and San Francisco Fed President Mary Daly suggested three potential rate cuts in 2024 but underscored that it's too soon to act. 
• On Tuesday, Jerome Powell commented that there was no rush to cut rates and that the bank remains data-dependent.
• June has not been ruled out for the initial cut, with current market odds still favoring a rate cut at 68%.

DXY technical analysis: DXY grapples with slight selling pressure, overall bullish sentiment remains

In the DXY technical landscape, the Relative Strength Index (RSI), although on a negative slope, is still situated in positive territory, implying a stalling upward momentum. However, the recent decrease in green bars on the Moving Average Convergence Divergence (MACD) histogram echoes a similar sentiment, suggesting a subtle shift in the dynamics from buying to selling pressure.

Still, on an encouraging note, the index continues to trade above the critical support levels dictated by its 20, 100, and 200-day Simple Moving Averages (SMAs). Despite a short-term negative outlook, this notably upbeat stance suggests that the bulls are still in control over the longer horizon. 

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