US Dollar trades with mild losses ahead of Retail Sales data, Treasury yields continue to rise

• Incoming data continues to influence easing cycle expectations with June as a potential start.
• Despite US CPI data intensifying, investor foresight accords more with frail labor market figures.
• Retail Sales and weekly Jobless Claims figures will dictate the pace of the USD for the rest of the week.

The US Dollar Index (DXY) exchanges hands at 102.80, recording mild losses. Despite hot figures from the latest Consumer Price Index (CPI) release, investors' expectations for the start of the Federal Reserve’s (Fed) interest rate cuts didn’t see major changes. Weighed down by a weak labor market, investors are holding their breath for the upcoming data on Retail Sales, awaiting further cues on the health of the US economy.

As for now, due to some weaknesses detected in the US labor market, investors may post their focus on the Unemployment evolution to time the start of the rate cuts. Additionally, any weakness in US economic activity may take the focus off the rise in February inflation.

 Daily digest market movers: DXY trades evenly in anticipation of additional US data

• The February US Consumer Price Index (CPI) data demonstrates an unexpected rise in inflation. The headline YoY increase was 3.2% against the previous 3.1%, while core CPI rose by 3.8% on a yearly basis, in contrast to January's 3.7%.
• Upcoming US economic reports on Thursday include the Producer Price Index (PPI), expected to have risen by 1.2% YoY compared to 1.9% in January.
• Retail Sales and weekly Initial Jobless Claims will also be closely studied.
• Fed is projected to uphold current rates in the upcoming meeting in March with a mere 15% likelihood of a rate reduction in May and a slightly more probable 75% chance in June.
• The market continues to foresee an additional three rate cuts in 2024, however, a hawkish swing in the forthcoming March Dot Plot may change those forecasts.
• US Treasury bond yields are ascending with the 2-year at 4.61%, the 5-year at 4.17%, and the 10-year at 4.18%.

DXY technical analysis: DXY bears resume their path, bearish SMA crossover spotted at 103.70

Considering the technical indicators on the daily chart, selling momentum looks to be dominating the market at the moment. The Relative Strength Index (RSI), although flat, is hovering in negative territory, which signifies a bearish stand. However, the selling pressure seems to have been reduced for now as bears take a breather. 

The Moving Average Convergence Divergence (MACD) is also flat with red bars, which reflects the prevailing bearish momentum but insinuates that the selling force might be losing some steam after a 1% pullback last week. 

In addition, the Index is trading below the 20, 100, and 200-day Simple Moving Averages (SMAs), confirming bearish sentiment in the market. To add to that, the 20-day SMA performed a bearish cross with the 100 and 200-day averages at 103.70, which adds an argument to the negative outlook for the USD.