US Consumer Spending Rises; US Dollar Index Higher

The US Dollar Index is higher and looks poised to break an extended losing streak after data from the Bureau of Economic Analysis showed that US Consumer Spending rose for the 2nd month in a row. Personal Spending month-over-month climbed 5.6%, beating forecasts of 5.3%. This figure was however short of the 8.5% growth experienced last month (an upward revision) but represents a second month of improvement over the April and May 2020 figures that showed a slump of 6.9% and 12.6% respectively.

However, personal income in the US fell by more than was expected, posting a 1.1% drop (versus 0.8% consensus), but this figure was an improvement over the 4.4% (revised lower from a 4.2%) drop of the previous month.

The core Personal Consumption Expenditure (PCE) Price Index also dropped from 1% to 0.9% on an annualized basis. This showed a reduction in the Fed’s preferred guide for consumer inflation. 

In response, the US Dollar Index was able to push slightly higher and is currently trading at 92.97. The DXY had opened the day with a bearish gap, but the positive personal spending data has allowed it to close the gap and it is now trading flat on the day. 

Technical Outlook for USD Index

The USD Index opened with a bearish gap which saw it come in contact with the 92.50 support line. However, the positive data has allowed the daily candle to bounce and close this gap. However, the price remains within the range formed by the 92.50 support and the 93.17 price level. The US Dollar Index needs today’s candle to force its way above the 93.17 price level to provide a chance at further recovery. If this occurs, we could see the DXY aim for the 93.80 resistance. However, it would require a monumental shift in the sentiment for the US Dollar to allow for a further recovery towards 94.62 and possibly 95.03 or 95.19. Such a change in sentiment, no matter how temporal, has to come from the critical US data for next week (PMI and NFP data). 

On the flip side, failure to break above 93.17 fulfils the time filter for the breakdown of that level. We could then see a further push towards 92.50, coming off the back of a pullback rejection at 93.17. 90.97 (4 September 2017 low) would be a natural target below 92.50.

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USD Index Weekly Chart

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