US Dollar trims gains following consumer sentiment data, set to close a winning week

• The DXY Index trades just below the 200-day SMA as bulls are struggling to hold their ground.
• Existing Home Sales from December were weak, while the University of Michigan Consumer Sentiment arrived better than expected.
• Dovish bets on the Fed remain high.

The US Dollar (USD) is seen neutral by the end of the week and currently tallies a 0.90% weekly gain. Strong University of Michigan (UoM) data is keeping the USD afloat, but steady dovish bets on the Federal Reserve (Fed) limit the upward potential.

The US economy appears overheated, tempering the market's dovish expectations, although the chances of interest rate cuts in March and May lingers at around 50%. Thus, the US dollar remains in fluctuating currents, affected by both resilient economic performance and dovish bets on the Fed's likely moves.

Daily digest market movers: US Dollar stands neutral as markets asses UoM and Housing data

• The Michigan Consumer Expectations for January reported by the University of Michigan (UoM)  came in at 75.9, an increase from the December figure of 67.4.
• The five-year Inflation Expectations saw a slight decrease of 2.8% compared to the previous month's 2.9%.
• Similarly, the UoM’s Inflation Expectations for January were down to 2.9% from the previous 3.1%.
• The Current Conditions for January increased to 83.3 compared to December's 73.3.
• December’s Existing Home Sales from the National Association of Realtors (NAR) turned out lower than expected at 3.78M against the anticipated 3.82M.
• The yields for US bonds are still advancing with the 2-year yield at 4.41%, the 5-year yield at 4.09%, and the 10-year yield at 4.17%. All three are at their highest level since mid-December.
• As per the CME FedWatch Tool, the odds of cuts for March and May eased, but they remain high at 55% and 45%, respectively.

Technical Analysis: DXY Index bulls shows resilience, must recover the 200-day average

The Relative Strength Index (RSI) showcases an upward slope, residing well within positive territory, which generally denotes bullish strength. This is concurrent with the Moving Average Convergence Divergence (MACD), which, propelled by the rising green bars, indicates strong buying momentum. However, those indicators are starting to flatten as the index tallied a five-day winning streak.

Reflecting upon the Simple Moving Averages (SMAs), the index holds a position above the 20-day average, denoting an undercurrent of bullish dominance in the immediate short term. However, if the bulls fail to regain the 200-day SMA, more downside may be on the horizon.

Support levels: 103.20, 103.00, 102.80.
Resistance levels 103.40 (200-day SMA), 103.60, 103.80.