US Dollar gains after PCE figures

• US inflation, as measured by the PCE Price Index, remained unchanged at 2.5% YoY in July.
• The USD is gaining due to the strength of its economy while inflation is coming down
• The labor market is still the focus for September's decision

On Friday, the US Dollar, measured by the US Dollar Index (DXY), extended gains after the release of July's Personal Consumption Expenditures (PCE) Index, which showed inflation continuing to be kept at bay.

With inflation coming down and economic activity steady, the outlook justifies rate cuts by the Federal Reserve (Fed), whose chairman has already stated that there will be a cut in September. However, the PCE print may not have been dovish enough to persuade the central bank to start with a 50-basis-point cut.

Daily digest market movers: DXY gains ground after PCE figures

• Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve's (Fed) preferred inflation gauge, remained unchanged at 2.5% on a yearly basis in July, below the market expectation of 2.6%.
• Core PCE Price Index, excluding volatile food and energy prices, also matched June's increase at 2.6%, below the market forecast of 2.7%.
• The data suggests that inflation is coming down, but the pace of the cutting cycle will be dictated by the incoming labor market data.
• CME FedWatch tool now shows a near 30% probability of a 50-basis-point rate cut in September, which has slightly declined.

Technical outlook: Bullish momentum increases, target now at 102.00

Technical analysis indicates a potential recovery for the DXY index. The Relative Strength Index (RSI) is trending upward, while the Moving Average Convergence Divergence (MACD) is printing lower red bars. If the DXY remains above the 101.00 level, it could trigger a rally toward the 20-day Simple Moving Average (SMA) at 102.00. That being said, the overall outlook is negative, but a recovery of the mentioned SMA might flip the table.

Key support levels are at 100.50, 100.30 and 100.00, while resistance levels are at 101.70, 101.80 and 102.00.