US Dollar Index retreats towards 108.50 as Jackson Hole looms

1. US Dollar Index steadies after bulls retreated earlier in the week.
2. Mixed US data, anxiety ahead of Jackson Hole symposium tests buyers.
3. Market sentiment remains mildly positive, yields stay firmer around two-month high.
4. Second version of US Q2 GDP, Core PCE data will be in focus ahead of Powell’s key speech.

US Dollar Index (DXY) seesaws around 108.65-70, picking up bids of late, as traders struggle for clear directions during Thursday’s Asian session.

The greenback’s gauge versus the six major currencies marked another failure to refresh the multi-year top the previous day, despite posting mild gains, as mixed data and cautious mood as the Jackson Hole symposium begins.

US Durable Goods Order for July dropped to 0.0% versus 0.6% expected and an upwardly revised 2.2% previous reading. However, Nondefense Capital Goods Orders ex Aircraft rose past 0.3% market consensus to 0.4%, versus 0.9% prior. Further, Pending Home Sales improved to -1.0% MoM in July versus -4.0% expected and -8.9% prior (revised down from -8.6%). On a yearly basis, the Pending Home Sales decreased by 19.9%, versus the previous contraction of 20.0%.

It’s worth noting that the economic fears, however, underpinned the US dollar’s safe-haven demand as Sara Johnson, Executive Director of Economic Research at S&P Global Market Intelligence, said in a statement on Wednesday, that global growth is likely to remain subdued in late 2022 and 2023 while inflation is seen moderating over the next two years.

On the other hand, hopes that China may overcome the recession woes and Fed’s Powell may repeat his cautious statements at the Jackson Hole also seemed to have tested the DXY bulls. “Various Chinese state media agencies are coming to the rescue of the local currency, the yuan, after the recent depreciation, justifying that the country’s strong exports should offset a stronger dollar and hawkish Fed rate hikes,” mentioned Reuters on Wednesday.

That said, the US 10-year Treasury yields rose the most in a week while refreshing a two-month high of around 3.10% whereas the Wall Street benchmarks printed mild gains, which in turn helped S&P 500 Futures to remain mildly bid at around 4,150 at the latest.

Moving on, the second version of the US Q2 GDP will join the US Personal Consumption Expenditure (PCE) for the said period to decorate the calendar. However, major attention will be given to Jackson Hole for fresh impulse. “Jerome Powell's speech in Jackson Hole will be scrutinized for any indication that an economic slowdown might alter the Fed’s strategy,” mentioned Reuters ahead of the key speech from Fed’s Powell. The update also mentioned that the US dollar could give back some gains on Friday if Powell expresses any concerns about the impact of the monetary tightening.

Technical analysis
DXY remains sidelined unless crossing the range between 109.30 and 108.30, comprising the yearly peak and a two-week-old support line respectively.