DXY Drops Below 99 Amid Rate Cut Bets, Key Data Awaited

The U.S. Dollar Index (DXY) has fallen below the 99 level, marking a significant shift in the currency market. This decline comes after weeks of selling pressure, with the greenback struggling to maintain support above $99.00. The recent back-and-forth on tariffs and rate cut bets have added to the market's unease, with traders pricing in substantial rate cuts by the end of the year. This has contributed to the dollar's downward momentum, as the DXY remains stuck below its 50-day Exponential Moving Average (EMA) at $100.57.

The technical indicators suggest that while sellers are still in control, the Moving Average Convergence Divergence (MACD) is flattening, which could indicate a potential shift in momentum. The upcoming week is crucial, with several macroeconomic data points that could serve as catalysts for either a rebound or further decline in the DXY. Key events include the Richmond Manufacturing Index, Flash Manufacturing and Services PMI, New Home Sales, Unemployment Claims, Core Durable Goods Orders, Durable Goods Orders, Existing Home Sales, and the University of Michigan Consumer Sentiment.

Analysts warn that a decisive break below 99 in the DXY could signal more persistent USD weakness and a broader deterioration in sentiment. The index's inability to firmly break below 99, despite several days of downward pressure, suggests a level of resistance. However, if the data surprises to the upside, the index could potentially rebound to $100.27, with further room to $101.28. Conversely, a break below $99.00 could see the index drop to $97.91 or even $96.80.

The dollar's current position is at a crossroads. Stronger-than-expected economic data could lift the dollar by reducing rate cut expectations, while weaker data could lead to further downside. Traders are advised to wait for confirmation, especially around the PMI and durable goods data, before entering any positions. The next move for the dollar will be significant, and the upcoming week will be pivotal in determining its direction.