US Dollar secures gains, primarily driven by strong Retail Sales and rising yields

• DXY Index rises decisively, trading with gains around 103.50 level above the 100-day SMA.
• US Retail Sales in the last month of 2023 rose higher than expected.
• Markets ease their dovish bets on the Fed for March and May FOMC meetings.

The US Dollar (USD) reached a notable stride, trading at 103.50 while confidently deflecting the pressures of the 100-day SMA. This robust stride has been primarily fueled by the strong US Retail Sales data from December and a notable rise in US Treasury yields, both of which show that markets are adjusting their bets on the Federal Reserve’s (Fed) rate-cutting timeline. 

The resilient US economy, evidenced by the latest data, is making adjustments to the market's dovish bets, albeit odds for rate cuts in March and May still hover around 50%. In December, CPI inflation picked up, as well as the job creation pace and wages, while economic activity remains strong, which is making markets believe that the Fed might not consider cutting rates too soon.

Daily digest market movers: US Dollar ascends, bolstered by strong Retail Sales from December

• December's Retail Sales reported by the US Census Bureau outperformed consensus, registering 0.6% growth versus the 0.4% forecast and 0.3% from the previous period. 
• Later in the session, the Fed will release its Beige Book to provide markets further insight on the US economy’s situation.
• An uptick was observed in US bond yields as 2-year, 5-year and 10-year notes currently trade at 4.30%, 4.02%, and 4.09%, respectively.
• As per the CME FedWatch Tool, the odds of cuts for March and May eased, but they remain high at around 50%.

Technical Analysis: DXY bulls step in and regain the 100-day SMA but now must defend it

The indicators on the daily chart reflect a somewhat bullish bias. The Relative Strength Index (RSI) demonstrates a positive slope in positive territory, endorsing growing buying momentum. The Moving Average Convergence Divergence (MACD) shows rising green bars, indicating the continuance of upward traction in favor of bulls.

The position of the index regarding Simple Moving Averages (SMAs) reveals a mixed picture. The DXY is now positioned above the 20 and 100-day SMAs, an encouraging sight for the buyers. However, it remains below the 200-day SMA, suggesting an undercurrent of bearish sentiment. Despite the recent bearish movements, bulls appear to be gaining ground.

Support levels: 103.40 (100-day SMA), 103.00, 102.80, 102.50.
Resistance levels: 103.60, 103.80, 104.00.