US Dollar gains modestly despite PMI data disappointing

• The US Dollar Index holds above 106.50 following weak US PMI data.
• US service sector contracts unexpectedly in February, weighing on sentiment.
• Consumer sentiment drops, while inflation expectations rise, adding pressure to USD.

The US Dollar Index (DXY), which tracks the US Dollar's performance against six major currencies, is holding on to minor gains on Friday, trading around 106.50. This slight recovery follows disappointing preliminary PMI data, signaling that the US economy is no longer significantly outpacing the Eurozone or other major economic blocks. A weaker services sector print weighed on market sentiment, though manufacturing gains provided some balance.

Daily digest market movers: US Dollar holds gains despite weak PMI data

• US Manufacturing PMI for February beats expectations at 51.6, surpassing both the 51.5 consensus and January's 51.2 reading.
• US Services PMI drops into contraction at 49.7, falling short of the 53.0 forecast and January's 52.9.
• University of Michigan Consumer Sentiment Index falls to 64.7, missing the 67.8 forecast and prior reading.
• 5-year Consumer Inflation Expectations rise to 3.5%, above the 3.3% consensus and previous reading.
• Markets continue monitoring tariff threats, with potential increases on the horizon over the weekend. Anything that could spark concerns of a trade war between the US and China might cushion the USD's losses.

DXY technical outlook: Recovery attempts as bearish momentum softens

The US Dollar Index has regained some traction, hovering around 106.50 as it tries to reclaim the 100-day Simple Moving Average (SMA) at 106.60. Despite the mild recovery, technical indicators remain in bearish territory.

Both the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) show signs of a slight improvement but remain in negative zones. The next resistance level is near 107.00, while support rests around 106.00. A decisive break below the 106.00 threshold could confirm a bearish outlook in the short term.