US Dollar holds gains higher after Fed's comments, US CPI

• DXY holds gains around 106.00 after Fed's Bullard comments.
• US CPI data showed inflation in October rising by 2.6%, in line with estimates.
• Core CPI rises by 3.3%, exceeding expectations and driving US yields higher.

The US Dollar Index (DXY), which measures the value of the USD against a basket of six currencies, has surged higher on Wednesday in response to hawkish comments from Federal Reserve (Fed) officials. Dallas Fed President Robert Kaplan expressed caution regarding the possibility of a December rate cut, dampening expectations that had been building in the market. The DXY has climbed above 106.00, reaching a fresh six-month high as a result of these comments but mildly retreated after Consumer Price Index (CPI) data from October, which didn’t show major surprises.

Daily digest market movers: US Dollar holds gains after US CPI

• The DXY is experiencing a mild corrective decline after the release of US CPI data for October.
• The DXY is hovering around 105.80, supported by a marginal retracement in US yields across the curve.
• The Bureau of Labor Statistics reported that the headline CPI rose by 2.6% YoY last month, matching prior forecasts.
• Core CPI, which excludes food and energy, increased by 3.3% over the last 12 months.
• The Fed members are cooling down the market’s expectations of the central bank’s aggressive easing cycle, but investors are quite confident of another 25 bps cut in December.

DXY technical outlook:  Bullish momentum continues for Greenback

Despite a slight pullback on Wednesday, technical indicators for the DXY Index remain bullish, suggesting a potential continuation of the uptrend. The RSI and MACD indicate continued positive momentum. While consolidation or a pullback is possible before a further advance, the overall technical outlook remains positive with resistance levels at 106.50, 107.00 and 107.30 and support levels at 105.50, 105.30 and 105.30.

That being said, the DXY's surge above 106.00, approaching its highest level since July, is supported by positive indicators. However, the indicators are approaching overbought territory, indicating a potential reversal or consolidation. Traders should monitor the index's behavior around these levels to assess the sustainability of the uptrend. A rejection at the overbought area could signal a pullback or a change in market sentiment, while a sustained break above these levels could extend the bullish momentum.