US Dollar Price, Charts, and Analysis

• US economic upturn ‘lost momentum’ at the start of Q2 – S&P Global.
• Official Q1 GDP is released on Thursday, and Core PCE on Friday.
• US dollar slips but the sell-off may be short-lived.

US business activity continued to increase in April, but ‘the rate of expansion slowed amid signs of weaker demand’, according to the latest S&P Global Flash PMI report. All three readings hit multi-month lows, while the Manufacturing PMI fell back into contraction territory. Commenting on the data, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said:

“The US economic upturn lost momentum at the start of the second quarter, with the flash PMI survey respondents reporting below-trend business activity growth in April. Further pace may be lost in the coming months, as April saw inflows of new business fall for the first time in six months and firms’ future output expectations slipped to a five-month low amid heightened concern about the outlook.”

S&P Global Flash US PMIs – Full Report

Shorter-dated US Treasury yields move lower post-PMIs but remain at elevated levels. The rate-sensitive 2-year has tried, and failed, to break above 5% in the past few weeks as US rate cut expectations are pared back. From the best part of 170 basis points of cuts forecast at the end of last year, the markets are now showing just 44 basis points, with the first quarter-point cut seen at the September 18th FOMC meeting.

This week also brings a total of $183 billion of new, shorter-dated US Treasuries to the market. Today sees $69 billion 2-years on the block, while $70 billion 5-years and $44 billion 7-years will be auctioned off on Wednesday and Thursday respectively. Any poor auction will push outstanding UST yields higher.

From a technical angle, the US 2-year yield chart may be making a bullish flag formation which if completed would suggest a re-test of the October 19th high at 5.26%.

UST 2-Year Yield Daily Chart

US dollar traders will now be on alert for three major US data releases, US durable goods (Wednesday), US Q1 Flash GDP (Thursday), and US Core PCE on Friday. All three are potential market movers but it’s the last two that carry the most heft.

The US dollar index is down a fraction post-PMIs but remains elevated. A break above 106.58 would leave October’s high at 107.335 vulnerable and would completely retrace the July 2023 - December 2023 sell-off. All three simple moving averages remain in a bullish formation, while the 50-/200-day bullish crossover made in late March continues to steer the market higher.

US Dollar Index Daily Chart

All Charts via TradingView

What are your views on the US Dollar – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

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