US Dollar steadies as markets turn cautious ahead of CPI, Fed decision

• The US Dollar was unable to hold on to Monday’s gains. 
• The Greenback eases a touch after headlines that Le Pen won’t run in the June French snap elections.
• The US Dollar index trades just above 105.00 and flirts with nearby support levels.

The US Dollar (USD) trades flat, just above 105.00 on Tuesday, and is unlikely to move away in the coming hours unless something pivotal occurs. Despite its gains from Monday, after French President Emmanuel Macron called for snap elections in June, the sting is being taken out of the event with Marine Le Pen, head of the Far Right movement in France, will not be running in those . This actually eases the odds for an upheaval shift in the upcoming French elections, which are just three weeks away. 

On the economic front, the US Dollar index (DXY) moves alongside political news out of Europe ahead of Wednesday’s main events: the US Consumer Price Index for May and the Federal Reserve (Fed) interest rate decision. Before that, two very light data elements will find their way to the markets on Tuesday: the NFIB Business Optimism Index for May and the Redbook Index for the first week of June. 

Daily digest market movers: Wake me up when Wednesday starts

• The m ain headline hitting the wires on Tuesday comes from France, where Marine Le Pen, head of the Far Right movement, said she will not be running in the upcoming snap elections at the end of June. This can be considered as a victory for current French President Emmanuel Macron as his government sees its odds of surviving these snap elections rising with Le Pen now backing down. 
• At 10:00 GMT, the National Federation of Independent Business (NFIB) has released its Business Optimism Index for May. The result was a beat on expectation an the previous print of 89.8, with 90.5 as number for May. 
• At 12:55 GMT, the Redbook Index for the week ending June 7 will be released. The previous reading was at 5.8%, and no forecast is available. 
• The US Treasury is set to unleash some debt to the markets
• 52-week bill auction expected at 15:30 GMT.
• 10-year Note Auction will be allocated at 17:00 GMT. 
• Equities are mixed on Tuesday. European indices are recovering on the back of the French elections news, while Chinese stocks are sliding lower by near 1%. US futures are flat. 
• The CME FedWatch Tool shows a 45.6% chance of the Federal Reserve (Fed) interest rate at the current level in September. Odds for a 25 basic points rate cut stand at 50%, while a very slim 4.4% chance is priced in a 50 basic points rate cut
• The benchmark 10-year US Treasury Note slides to the lowest level for this week, near 4.44%, and flirts with further declines. 

US Dollar Index Technical Analysis: Yawn!

The US Dollar Index (DXY) could be summarised with one word on Tuesday: Yawn! Expect no big movements, with markets remaining sidelined ahead of the main US events for this week on Wednesday.

On the upside, there are some technical or pivotal levels to watch out for. The first is 105.52, a level that held support during most of April. The next level to watch is 105.88, which triggered a rejection at the start of May and will likely play its role as resistance again. Further up, the biggest challenge remains at 106.51, the year-to-date high from April 16. 

On the downside, a trifecta of Simple Moving Averages is now playing as support. First, and very close, is the 55-day SMA at 105.05. A touch lower, near 104.47, both the 100-day and the 200-day SMA are forming a double layer of protection to support any declines in the US Dollar index. Should this area be broken down, look for 104.00 to salvage the situation.