• The US Dollar eases a touch on the back of softer PPI release. 
• Carry and high-beta currencies are pushing back against the US Dollar. 
• The US Dollar index orbits around the 103.18 pivotal level.

The US Dollar (USD) trades a touch softer on Tuesday, after the July Producer Price Index (PPI) numbers came in softer than expected. The hurted carry and high-beta trades that were on the fence last week are currently outperforming against the Greenback, with the Polish Zloty (PLN), Australian Dollar (AUD), New Zealand Dollar (NZD) and Czech Koruna (CZK) as main gainers. Still,  these moves are not visible at all in the DXY chart because the US Dollar is outperforming against the Japanese Yen (JPY). 

On the economic data front, the calendar is starting to pick up a bit. The Producer Price Index (PPI) came in much softer on all fronts for both the monthly and yearly figure in both the core and headline release. This adds up to expectations for Wednesday where a further disinflationary print in the US Consumer Price Index (CPI) is now the minimum base case expectation. 

Daily digest market movers: PPI data proves soft

• The NFIB Business Optimism Index for July came in at 93.7, coming from the 91.5 reported in June.
• At 12:30 GMT, the US Producer Price Index data for July has been released:
  • Monthly headline PPI fell from 0.2% to only 0.1%. The yearly figure went from 2.7% to 2.2%.
  • As for the core readings, monthly Core PPI fell to 0%, coming from 0.3%, while the yearly timeframe fell from 3% to 2.4%. 
• Around 17:15 GMT, Federal Reserve Bank of Atlanta President Raphael Bostic participates in a moderated conversation at the Conference of African American Financial Professionals in Atlanta, United States.
• European and US equities are jumping in the green after the very soft PPI print for July. 
• The CME Fedwatch Tool shows a 52.5% chance of a 25 basis points (bps) interest rate cut by the Fed in September against a 47.5% chance for a 50 bps cut.  Another 25 bps cut (if September is a 25 bps cut) is expected in November by 38.5%, while there is a 49.7% chance that rates will be 50 bps below the current levels and and a 11.7% probability of rates being 75 basis points lower. 
• The US 10-year benchmark rate trades at 3.87%, and dives lower after the soft PPI print

US Dollar Index Technical Analysis: PPI jacks up CPI expectations

The US Dollar Index (DXY) is getting torn between two forces. One element is that the high beta and carry traders are regaining strength after their substantially weak performance since the beginning of August. Though, the US Dollar is gaining against the Japanese Yen in the meantime.The Yen accounts for 13.6% of the DXY against no weighting at all for the Australian Dollar or the Polish Zloty, which paints a standstill picture on the DXY chart. 

Still, the first level to recover, which gains importance every day, is 103.18, a level held on August 2 though snapped on August 5 in the Asian hours. Once the DXY closes above that level, next up is 104.00, which was the support from June. If the DXY can return above that level, the 200-day Simple Moving Average (SMA) at 104.15 is the next resistance to look out for. 

On the downside, the oversold condition in the Relative Strength Index (RSI) indicator has eased in the daily chart and holds room again for a small leg lower. Support nearby is the March 8 low at 102.35. Once through there, pressure will start to build on 102.00 as a big psychological figure before testing 101.90, which was a pivotal level in December 2023 and January 2024.

US Dollar Index: Daily Chart