US Dollar Index braces for biggest weekly loss since early May

• DXY stays pressured around monthly low, prints five-day downtrend.
• US Q2 GDP backs the Fed’s resistance to offer tapering hints.
• Covid woes escalate in Australia, Japan but mark mixed signals in the West.
• US second-tier data, risk catalysts will provide intermediate direction.

US Dollar Index (DXY) edges lower around 91.90, down 0.02% intraday, after a four-day south-run amid Friday’s Asian session. In doing so, the greenback gauge is on the way to post the biggest weekly losses since May 03 as market sentiment backs the Federal Reserve’s (Fed) latest refrain to discuss anything more about monetary policy tightening.

Having witnessed lesser-than-forecast Q2 US GDP prints, traders finally understood why Fed Chairman Jerome Powell asked for few more meetings before discussing the taper. The first reading of the US Q2 GDP eased below 8.5% market consensus to 6.5%, versus 6.4% prior, on the quarterly basis. However, the consumer spending details remain robust and suggest economic recovery.

In addition to the growth figures, upbeat weekly Jobless Claims and further softening of the housing data also convinced market players of further easy-money policies from the Fed, which in turn dragged the DXY. Also exerting downside pressure on the US Dollar Index could be the ongoing talks of US President Joe Biden’s infrastructure spending plan in the Senate.

It’s worth mentioning though that US President Biden’s latest push for the vaccination to the White House workers and covid jitters in Australia and Japan put a floor under the greenback. That said, Australia registers the highest daily infections since August while Japan marks over 10,000 cases a day for the first time and stays ready to take more prefectures under the emergency alert.

Amid these plays, US 10-year Treasury yields drop 1.3 basis points (bps) while S&P 500 Futures drop half a percent by the press time.

Looking forward, global traders may take a breather but Eurozone GDP and the US Core Personal Consumption Expenditures (PCE) - Price Index data may entertain the bears.

Read: US Core Personal Consumption Expenditure Price Index June Preview: Bad will not be bad enough

Technical analysis

A clear downside break of the 92.00 horizontal support directs US Dollar Index towards 91.55–50 key rest area comprising late June’s low, 50-DMA and 100-DMA.