US DOLLAR INDEX - Will the dollar bounce back from its current decline? - 09/03/2024 (GMT)

<Fundamental>
The latest July PCE data clearly indicates a significant slowdown in inflation. The headline PCE data shows a 2.5% increase from a year ago, closely approaching the Fed's 2% inflation target.  Moreover, the core PCE data, the Fed's preferred inflation measure, only rose by 0.16%, representing a notable deceleration from the previous month's 0.18%. The annualized figures for the past three months sit at 1.7%, falling below the Fed's 2% target.

It is worth noting that despite a 0.3% increase in personal income, surpassing the previous month's 0.2%, the savings rate continues to remain at an alarmingly low level. This is due to the fact that personal consumption expenditures are growing at a faster rate than personal income. The current savings rate has dropped to 2.9%, marking only the second instance in the past 16 years, since the global financial crisis, that the savings rate has fallen to the 2% range.

This implies that consumption in the United States could decline quickly, serving as a cautionary signal that if employment falters, there may be insufficient buffers to sustain consumption.


<Technical>
DXY sustained its uptrend after breaking out of the descending channel and advanced to 101.60. The price consolidates around the 101.50-101.70 range, waiting for an additional price trigger.

If the price breaches the resistance at 101.80 while holding above the EMA, the price may gain upward momentum toward 102.60. Conversely, if DXY fails to stay above both EMAs and retreats to the support at 100.50, the price could fall further to the 100.00 threshold.