US Dollar rises as dovish bets ease after US economic data

• The DXY Index sees strong gains and recovers above the 20-day SMA.
• US JOLTs Jobs Openings from November came in below expectations, while ISM’s December Manufacturing PMI came in higher than anticipated.
• Dovish bets on the Fed eased somewhat but are still high.

The US Dollar (USD) Index trades with noteworthy gains at 102.60, having successfully reclaimed the 20-day Simple Moving Average (SMA). This comes after the dovish bets on the Federal Reserve (Fed) eased somewhat following the release of the Institute Supply Management (ISM) Manufacturing PMI for December and the JOLTs Job Openings data for November. At 19:00 GMT, the Fed will release the minutes from its December meeting.

The Fed's dovish stance in its last 2023 meeting, welcoming cooling inflation and dismissing rate hikes in 2024, was positively received by markets that dumped the US Dollar in the last session. However, despite investors anticipating high odds of rate cuts in March and May 2023, incoming data could modify these expectations and focus shifts to December labor reports. 

Daily digest market movers: US Dollar gains momentum ahead of FOMC minutes, labor market data eyed

• The ISM's Manufacturing PMI for December climbed to 47.4, slightly above the consensus of 47.1.
• JOLTs Job Openings reported by the U.S Bureau of Labor Statistics came in at 8.75M, below the expected 8.85M.
• Market participants are eagerly awaiting reports such as US Nonfarm Payrolls, Average Hourly Earnings, Unemployment Rate, and the Automatic Data Processing Inc. (ADP) Employment Change from December to continue placing their bets on the Fed.
• The Federal Open Market Committee (FOMC) minutes might provide additional guidance to investors.
• Market speculation, as inferred from the CME FedWatch Tool, suggests that the odds of rate cuts in March and May have eased but are still high. A hold in January is priced in.

Technical Analysis: DXY index short-term indicators gain traction, outlook still fragile

The Relative Strength Index (RSI), with its position in positive territory and positive slope, indicates a strengthening buying momentum in the DXY, showing that buyers may continue pushing up the currency index price. This is reinforced by the rising green bars of the Moving Average Convergence Divergence (MACD), which suggest a shift towards bullish territory.

However, the picture isn't entirely optimistic, as seen in the Simple Moving Averages (SMAs). The index's position above the 20-day SMA underscores the short-term buying momentum, but its position below the 100 and 200-day SMAs serves as a reminder of the sustained selling strength that continues to prevail on broader time frames. This suggests a bearish undercurrent that may need to gain more momentum before the situation could tip in favor of sellers.

Support levels: 102.40 (20-day SMA),102.00, 101.50.
Resistance levels: 102.70, 102.90, 103.00.