US Dollar trades neutrally in anticipation of Fed's final 2023 meeting

• The DXY Index trades flat at 103.80.
• Investors await Fed decision alongside fresh economic and interest rate projections.
• November’s PPI from the US came in lower than expected.

The US Dollar (USD) Index holds steady around 103.8 on Wednesday, consolidating its position as investors weigh the data on November's Headline and Core Producer Price Index (PPI), which came in lower than expected. At the backdrop is the anticipation ahead of the Federal Reserve's (Fed) final meeting of 2023, a factor bearing heavily on the current market sentiment as it may shape the pace of the markets for the short term. 

As the US economy confronts cooling inflation and a resilient labor market, the Fed presents a cautious stance, not dismissing prospects of further tightening. Despite market speculation asserting a dovish orientation, the Fed still hasn’t declared victory on inflation, and this ambiguity keeps investors anxiously anticipating the Fed's Dot Plot projection, crucial for determining potential interest rate cuts in 2024. 

Daily Market Movers: US Dollar holds steady before Federal Reserve decision despite soft PPI figures

• The US Dollar is neutral as the market remains anticipative ahead of the Federal Reserve's last hike of 2023.
• The US Producer Price Index (PPI) showed a yearly ascent of 0.9% in November, a slowdown from its 1.2% climb in October.
• Furthermore, the yearly Core PPI rose by a marginal 2%, lower than October's figures and the market’s forecast of 2.4% and 2.2%, respectively.
• US bond yields are on a downward slope, with the 2-year, 5-year, and 10-year rates reported at 4.66%, 4.17%, and 4.15%,, respectively.
• No rate hikes are expected for today’s meeting, according to the CME FedWatch Tool. Expectations are forming around potential rate cuts for May 2024.
• The latest interest rate Dot Plot chart from the Federal Reserve indicates a median projection that places the Federal Funds Rate at 5.1% by the conclusion of 2024. This means a modest 25-basis-point rate reduction over the course of next year.

Technical Analysis: DXY index faces consolidation phase with a bullish tilt 

The indicators on the daily chart reflect a somewhat neutral yet cautiously optimistic stance. The Relative Strength Index (RSI) is flat and currently in negative territory, and yet the bears are taking a breather, which underscores that selling pressure is easing. 

The Moving Average Convergence Divergence (MACD), which mirrors similar sentiment, is flat too but with green bars suggesting a minor bullish bias in the short term. 

In terms of Simple Moving Averages (SMAs), the price is oscillating above the 20-day SMA and the 200-day SMA, reflecting that buyer momentum is holding resilient, especially in the larger time frames, with some degree of dominance over the sellers. 

However, the asset is trading below the 100-day SMA, indicating that the bullish momentum is somewhat restrained and could face resistance. Also, traders should eye a potential bearish crossover between the 100-day and 200-day SMA, which could shift the balance toward sellers. 

Support levels: 103.70 (20-day SMA), 103.50, 103.30.
Resistance levels: 104.50 (100-day SMA), 104.50, 104.70.