US Dollar looks bleak ahead of US GDP and Jobless Claims

• The US Dollar is further losing its shine in early Thursday trading. 
• Markets are fretting over US GDP and Jobless Claims data. 
• The US Dollar Index enters trades in a bearish pattern, potentially signalling more downside ahead. 

The US Dollar (USD) is receiving another hit on Thursday and doesn’t seem to need much more to fall against the canvas with a KO. The biggest reason behind the recent decline is the downbeat start of the earnings season in the US. Traders are starting to get worried about the string of earnings that paint a very mixed picture about the economy after META’s results were not well received. These reports come along with announcements of layoffs, adding to signs that the era of job tightness might be coming to an end. 

On the economic data front, there is plenty of data to dive into on Thursday ahead of the earnings from Alphabet and Microsoft. The main data point is the preliminary US Gross Domestic Product (GDP)  release for Q1. The main focus will be on the headline GDP and the Personal Consumption Expenditure (PCE) component. As per every week, the Jobless Claims are to be released as well, and will get an increased priority in coming weeks to see if those announced layoffs during recent earnings are materialising. 

Daily digest market movers: GDP could be the last element before a correction

• A big slew of data is set to be released at 12:30 GMT:
  • Weekly Jobless Claims:
    • Initial Claims for the week ending on April 19 are expected to head to 214,000 from 212,000.
    • Continuing Jobless Claims for the week ending on April 12 are expected to shrink to 1.810 million from 1.812 million.
  • US Gross Domestic Product preliminary reading for Q1:
    • Headline GDP is expected to shrink to 2.5% from 3.4%.
    • Headline PCE was previously at 1.8%, with no forecast available.
    • Core PCE is seen rising to 3.4% from 2%.
    • GDP Price Index was at 1.7% in Q4 of 2023, with no forecast pencilled in. 
    • Wholesale Inventories are set to decline further to 0.2% in March from 0.5%.
• Monthly Pending Home Sales are expected to increase by 0.3% in March against the previous reading of 1.6%.
• The Kansas Fed Manufacturing Activity for April is set to be published at 14:30 GMT. The previous figure for  March was at -9, with no forecast available for April data.
• Equities are looking unstable on Thursday, with Asian equities mixed. Japan closed in the red, with more than 1% losses. In Europe, both the German Dax and broader Stoxx 50 are in the red by 0.5%. Ahead of the US opening bell, the Nasdaq futures are down over 1%.
• The CME Fedwatch Tool suggests there is an 83.1% probability that June will still see no change to the Federal Reserve's feds fund rate. . Odds of a rate cut are broadly at 50%-50% for July, while for September the tool shows a 70% chance that rates will be lower than current levels.
• The benchmark 10-year US Treasury Note trades around 4.64% and keeps lingering around this level.

US Dollar Index Technical Analysis: Is this a turnaround?

The US Dollar Index (DXY) is forming a bearish pattern which often preceds a substantial correction in prices. For a third day in a row, lower highs and lower lows are being printed on the daily chart. This points to relentless selling and builds up pressure for more downside, which can only be halted by strong pivotal support levels. 

On the upside, 105.88 (a pivotal level since March 2023) needs to be recovered again before targeting the April 16 high at 106.52. Further up and above the 107.00 round level, the DXY index could meet resistance at 107.35, the October 3 high. 

On the downside, 105.12 and 104.60 should act as support ahead of the 55-day and the 200-day Simple Moving Averages (SMAs) at 104.37 and 104.07, respectively. If those levels are unable to hold, the 100-day SMA near 103.70 is the next best candidate.