US Dollar remains vulnerable amid dovish bets on the Fed ahead of Thursday's PCE inflation figures

• DXY Index trades neutral at 103.40.
• The US reported mixed housing market data on Monday.
• All eyes are on PCE data from October to be reported on Thursday.

  
The US Dollar (USD) Index hovers at 103.40 in neutral territory. The Greenback remains vulnerable due to dovish speculation on the Federal Reserve's future movements, and markets brace for Thursday's Personal Consumption Expenditures (PCE)  figures, the Federal Reserve's (Fed) preferred inflation gauge. On the data front, October's reports of New Home Sales and Building Permits, released during the session, did not impact the USD’s dynamics.

Amid cooling labour market performance and inflation in the United States economy, the markets are betting on a dovish Federal Reserve, which has weakened the US Dollar. Before the December meeting, where markets will get clear guidance, investors will get October’s PCE figures, an additional jobs report, and the November Consumer Price Index (CPI). These releases will likely set the pace for the next movements of the US Dollar..

Daily Market Movers: US Dollar trades neutral; markets await guidance on October PCE inflation figures 

• The US Dollar navigates a neutral range, susceptible to looming PCE inflation figures and dovish bets on the Fed.
• On the data front, October registered a downturn in New Home Sales, coming short of the expected 725K with an actual figure of 679K, as reported by the US Census Bureau.
• A bright spot in October was the Building Permits figure, which exceeded both previous and predicted numbers at 1.498 million.
• The tables have turned for US bond yields, which are witnessing a downturn to start the week with 2-year, 5-year and 10-year yields standing at 4.92%, 4.44% and 4.42%, respectively, now limiting the USD’s advance.
• According to the CME FedWatch Tool, markets are pricing in a no-hike at the December meeting. Rate swaps futures see rate cuts in mid-2024.

Technical Analysis: US Dollar faces headwinds as bearish trend persists

The Relative Strength Index (RSI) indicates that the US Dollar is trading near oversold territory. This suggests that the selling pressure is excessive, hence the prevailing bearish momentum. Additionally, the Moving Average Convergence Divergence (MACD) histogram shows the MACD line is below the signal line, providing evidence of a potential bearish reversal. 

Adding to the bearish case, the currency pair remains under the shield of its 20, 100 and 200-day Simple Moving Averages (SMAs), indicating that bulls are having a tough time wresting control from bears. With the pair beneath the SMAs, a continuation of the downtrend could be on the cards. 

Support levels: 103.30, 103.15, 103.00.
Resistance levels: 103.60 (200-day SMA), 104.00, 104.20 (100-day SMA)