US Dollar jumps with rising yields ahead of event-packed week

• DXY Index rose by 0.20% and consolidated above the 20-day SMA.
• Investors await the release of inflation data on Tuesday, ahead of the Fed’s decision on Wednesday.
• US Treasury bond auction might provide a push to yields later in the session.

The US Dollar (USD) is currently witnessing a strong uptrend, trading at 104.20, bolstered by rising yields and the cooling of dovish bets on the Federal Reserve (Fed) after the release of strong labor market figures last Friday. This week, the US will report November’s Consumer Price Index (CPI) figures, and the Fed meets on Wednesday.

Strong labor market signals and cooling inflation indicate inconsistency in the US economy. Despite these indicators, Federal Reserve officials are leaning toward a cautious stance, warning of further policy tightening. Tuesday’s inflation figures and fresh economic and interest rate projections on Wednesday will be key for markets to continue modeling their expectations of the bank's next decisions and will set the pace of  US Dollar price dynamics.

Daily Market Movers: US Dollar holds gains, ahead of November’s CPI, Treasury auction

• The US Dollar is trading with gains, boosted by rising yields ahead of an eventful week ahead.
• On Tuesday, investors will pay close attention to November’s headline and Core Consumer Price Index (CPI). The first one is expected to have decelerated, while the latter remains sticky at 4%.
• The yields on US bonds are on an upward trend, with rates of 4.75% for the 2-year yield, 4.26% for the 5-year yield, and 4.28% for the 10-year yield. 
• At 18:00 GMT, the US Treasury will auction notes 10-year tenures, which could drive yields up.
• According to the CME FedWatch Tool, market anticipation indicates no hike for Wednesday’s meeting. However, the markets are pricing in less easing for 2024.

Technical Analysis: DXY Index bulls step in and regain the 20-day SMA

On the daily chart, the Relative Strength Index (RSI) displays a positive slope in positive territory, reflecting an upward momentum for the Index. The Moving Average Convergence Divergence (MACD) illustratively endorses this bullish narrative, as rising green bars suggest that buying pressure is solidifying.

Considering the Index's positioning relative to the 20, 100 and 200-day Simple Moving Averages (SMAs), the situation offers further testament to this buyer-dominated environment. Despite being below the 100-day SMA, the index holding firm above both the 20 and 200-day SMA evinces the persistence of the buying force. 

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