US Dollar Hits Two-Month Lows as Investors Reassess Rate Hike Expectations

The US Dollar Index (DXY) has extended its losses for three consecutive days on Monday, hitting two-month lows below 99.40 during the European session.

This decline comes as investors reassess their expectations for immediate interest rate hikes by the US Federal Reserve (Fed), following recent US data that showed Retail Sales fell 0.6% in July, contrary to market expectations of a 0.1% gain.

According to strategists at Brown Brothers Harriman, the USD has 'extended last week's decline triggered by the downward adjustment to Fed funds rate expectations,' but notes there was 'no fresh catalyst behind today's broad-based USD slump.'

The technical analysis suggests that sellers are pushing against the bottom of the last two months' trading range, looking at the 200-day SMA at 99.15.

Momentum indicators in the daily chart point lower, with the Relative Strength Index (14) at 35 and the Moving Average Convergence Divergence (MACD) below zero.