US Dollar Strengthens, Nears Two-Year High on Positive Economic Data

The US Dollar kicked off Monday with a strong performance after a relatively sluggish start to the day. The currency received a significant boost from upward revisions in the preliminary November Durable Goods report, setting the stage for a stronger Greenback. The US Dollar Index (DXY) is now tantalizingly close to its highest point in two years.

Key Economic Indicators Drive US Dollar Rallying

The US Dollar (USD) is experiencing a rally on Monday, with the US Dollar Index (DXY) poised to hit a fresh two-year high. This surge follows the Greenback’s gains from the November Preliminary Durable Goods release. Despite the actual number’s lesser importance, the notably positive revision from 0.3% to 0.8% in the preliminary report is aiding in the Dollar’s upward trajectory.

The US economic calendar is expected to calm down slightly, focusing on a few minor secondary data points. Meanwhile, US Treasury markets will remain busy with several bond auctions. A wave of relief swept through US markets after the last-minute resolution of the government shutdown before the Christmas and New Year’s holidays.

Daily Market Movers: Treasury Activity and Key Indicators

• A government shutdown was narrowly averted on Friday, with US President Joe Biden signing the legislation on Saturday to fund the government until mid-March.
• The Chicago Fed National Activity Index for November came in at -0.12, an improvement from -0.40 in the previous release.
• The US Durable Goods report for November was initially released at -1.1%, reversing an upward preview of 0.3%. However, further revisions to 0.8% have driven the Dollar higher. The reading excluding cars and transportation fell slightly to -0.1%, a revision from 0.2%.
• The US Consumer Confidence index for December dropped to 104.7 from 111.7, with a similar upward revision of the previous reading to 112.8.
• The US Treasury will conduct four auctions on Monday, including 3-month, 52-week, and 6-month bills at 16:30 GMT and a 2-year Note at 18:00 GMT.
• Asian equities have ended their six-day losing streak, while European and US markets continue to face losses.
• The CME FedWatch Tool indicates a 91.4% probability of a stable policy rate and an 8.6% chance of a 25 basis points rate cut for the first Fed meeting of 2025 on January 29.
• The US 10-year benchmark rate currently sits at 4.56%, just below last week’s high of 4.59%.

US Dollar Index Technical Analysis: Approaching the Finish Line

The US Dollar Index (DXY) is approaching its final regular trading day before Christmas with a relatively inactive calendar ahead. Traders may adopt a cautious approach, focusing on short-term movements. Be aware that any significant price changes may be short-lived, facing rapid profit-taking.

On the technical front, an upward trending line from December 28, 2023, serves as an immediate ceiling. The next key resistance level is 109.29, the high reached on July 14, 2022, with a strong track record as a pivotal level. Breaking this could open the way to the psychologically significant 110.00 level.