US Dollar extends losses as weak Retail Sales weigh on sentiment

• The US Dollar Index fell close to 107.00 after Thursday's sharp decline.
• US Retail Sales fell 0.9% in January, missing expectations and fueling rate cut speculation.
• US Treasury yields continue to decline with the 10-year yield below 4.50%.

The US Dollar Index (DXY), which tracks the US Dollar's performance against six major currencies, remains stable after posting losses in the previous session. At the time of writing, the DXY hovers around 107.00, as economic data continues to paint a mixed picture. Weak Retail Sales weigh on sentiment, but Industrial Production provides some support.

Daily digest market movers: US Dollar weakens as traders reassess Fed outlook

• US Retail Sales dropped 0.9% in January, far worse than the -0.1% forecast, raising concerns about consumer spending.
• December Retail Sales were revised higher to 0.7%, slightly offsetting the latest disappointing data.
• Industrial Production rose 0.5% in January, beating expectations of 0.3% but slowing from December's 1.0% growth.
• Weak Retail Sales may lead traders to reassess expectations for the Federal Reserve's rate path.
• Fed Chair Jerome Powell reiterated that monetary policy adjustments require tangible inflation progress or labor market weakness.
• As for now, the CME FedWatch Tool now shows a 55% probability of unchanged rates in June, reflecting market uncertainty.
• US Treasury yields continue to decline sharply with the 10-year yield falling to 4.47% and making investors lose interest in the US Dollar.

DXY technical outlook: Further downside risk as bearish momentum builds

The US Dollar Index remains under pressure after losing the 20-day Simple Moving Average (SMA), signaling a bearish shift. The Relative Strength Index (RSI) continues to weaken, confirming negative momentum, while the Moving Average Convergence Divergence (MACD) remains entrenched in bearish territory.

Immediate support is seen at the 100-day SMA near 106.30 with a break below this level likely to confirm a short-term negative outlook. On the upside, resistance is now seen at 107.50, followed by the 20-day SMA at 108.00.