US Dollar trades flat after hot PPI figures, eyes on FOMC minutes.

• US Dollar continues to struggle to gain momentum.
• US PPI from September rose to 2.2% YoY, beating expectations
• The FOMC will release its minutes from the September meeting later in the session.
• Markets remain cautious amid the conflict between Israel and Hamas.

The US Dollar (USD) measured by the US Dollar DXY Index trades with mild losses after the release of hot Producer Price Index (PPI) figures and ahead of the Federal Open Market Committee (FOMC) minutes. In addition, the conflict in Palestine has escalated, which could make investors seek refuge in the green currency.

As the United States economic data doesn’t show evidence of a cool-down, the minutes from the September meeting from the FOMC will be closely monitored by investors to look for clues regarding the Federal Reserve's (Fed) next step. It's worth noting that in the last decision, the bank decided to hold rates steady at the 5.25-5.50% range, but the so-called “dot plot” revealed that most of the members are seeing high chances of an additional hike in this cycle. Also, projections revealed that rate cuts may be delayed, meaning that the Fed could maintain its restrictive policy at higher levels for longer.

Daily Digest Market Movers: US Dollar consolidates last week’s rally; resilient US economy and Middle East geopolitical tensions could reignite its bullish momentum.

• The US Dollar DXY index continues consolidating and trades neutral at 105.80.
• The September US Producer Price Index (PPI) rose to 2.2%, higher than the expected 1.6% and the same as the previous 2.2%.
• Investors will look for further clues of the Federal Reserve's (Fed) stance in the Federal Open Market Committee (FOMC) minutes, to be released later in the session.
• Regarding the last Fed forecast, the dot plot interest rate projections from the Fed remained at 5.6% for 2023, meaning higher chances of an additional 25 basis point (bps) hike.
• For 2024, the median Fed funds target rate was revised to 4.6% vs the 4.3% March projections, meaning that the Fed is delaying rate cuts.
• During the Press conference, Jerome Powell noted that monetary policy decisions will still depend on incoming data.

Technical analysis: US Dollar Index bullish momentum wanes, rejected by the 20-day SMA

The US Dollar Index DXY sees a neutral to bearish technical outlook for the short term, and the buyers fail to regain the 20-day Simple Moving Average (SMA), which could pave the way for further downside. On the daily chart, the Relative Strength Index (RSI) displays a negative slope near the 50 middle-point while the Moving Average Convergence Divergence (MACD) stands in negative territory, indicating that the bears hold the upper hand over the short term. However, the index is comfortably above the 100 and 200-day Simple Moving Averages (SMA), indicating that the bulls command the broader scale. As the sellers are gaining momentum, pushing the index below the 20-day average at 105.90, more downside may be on the horizon to continue consolidating the last week’s rally, with support lining up at 105.50, 105.30 and 105.00.