US Dollar selloff picks up steam after dismal US data

• US Dollar Index has declined to its weakest level since early February on Tuesday.
• 1.1000 aligns as the next bullish target for EUR/USD.
• Bloomberg reported Chinese Yuan replaced US Dollar as the most traded foreign currency in Russia.

The US Dollar (USD) came under heavy selling pressure in the second half of the day on Tuesday following the disappointing macroeconomic data releases. The market pricing suggests that the probability of the US Federal Reserve (Fed) raising its policy rate has dropped below 50% on Tuesday. Although Wall Street’s main indexes trade mixed after the opening bell, the currency is having a hard time attracting investors.

Daily digest market movers: US Dollar under persistent bearish pressure

• The US Bureau of Labor Statistics reported on Tuesday that the number of job openings on the last business day of February declined to 9.9 million from 10.5 million in January.
• The US Census Bureau announced that Factory Orders declined by 0.7% on a monthly basis in February, compared to the market expectation for a decrease of 0.5%.
• The US Dollar Index touched its lowest level since early February below 102.00 after weak US data.
• Bloomberg reported on Tuesday that Chinese Yuan has surpassed the US Dollar as the most traded currency, in monthly trading volume, for the first time in Russia in February. According to the outlet, the gap has continued to widen in March.
• Last week, Brazil and China have reached an agreement to stop using the US Dollar as an intermediary in trade transactions.
• On Sunday, Saudi Arabia announced that several producers in OPEC+ will participate in voluntary output cuts from May to the end of the year. The group’s total output will be reduced by more than 1.5 million barrels per day in that period.
• The barrel of West Texas Intermediate (WTI) started the week with a large bullish gap and touched its highest level since late January above $82. Following a consolidation phase, WTI holds comfortably above $80.
• Federal Reserve Bank of St. Louis President James Bullard said on Monday that the unexpected decision by OPEC to lower output could make the Fed’s jobs of bringing inflation down back to 2% target more challenging.
• ISM’s Report on Business revealed on Monday that the headline Manufacturing PMI declined to 46.3 in March from 47.7 in February, revealing a contraction at an accelerating pace in the manufacturing sector’s economic activity.
• The Prices Paid Index of the PMI survey, the inflation component, dropped to 49.2 from 51.3. This reading suggests that input inflation in the sector softened in March.
• Fueled by the upbeat performance of energy shares, the S&P 500 closed in positive territory on Monday.
• Later in the week, the ISM Services PMI survey, ADP private sector employment data and the US Bureau of Labor Statistics’ March jobs report could influence the US Dollar valuation.

Technical analysis: US Dollar set to weaken further against Euro

Despite the modest retreat seen at the beginning of the week, EUR/USD has managed to gather bullish momentum. The Relative Strength Index (RSI) indicator on the daily chart rose above 60 and the 20-day Simple Moving Average (SMA) made a bullish cross with the 50-day SMA. Both of these technical developments suggest that the pair’s bullish bias remains intact and there is more room on the upside before it turns technically overbought.