US Dollar sees mild losses ahead of PCE data

• DXY Index sees mild losses and trades around 103.20.
• Key US inflation and economic activity data are due this week .
• Market bets on the Fed cutting rates continue to adjust.

 
The US Dollar (USD) is currently trading at a mild loss at 103.25. This slight dip comes in light of a quiet session ahead of an eventful week.

The US economy remains robust with consistently firm data suggesting potential growth in Q4 and likely stability in Q1 2024. Regarding the Federal Reserve, market expectations have adjusted with the market anticipating approximately 125 basis points (bps) of easing over the  course of 2024, compared to nearly 175 bps anticipated earlier that gave the Greenback a lift earlier in January. Core Personal Consumption Expenditures (PCE) may shape the short-term expectations from the Fed and are set to be released on Friday.

Daily Digest Market Movers: US Dollar under mild pressure on quiet session, eyes on PCE and GDP data

• On Thursday, the US will release December Personal Consumption Expenditures (PCE) data, which is expected to show that inflation has stagnated. Gross Domestic Product (GDP) figures from Q4 are also due that day and markets expect the economic activity to have cooled off.
• US Treasury yields are in a downturn with the 2-year yield at 4.37%, the 5-year yield at 4.02%, and the 10-year yield at 4.10%.
• The CME FedWatch Tool indicates the odds of a rate cut in March have fallen to 50%. No policy changes are expected in next week’s Fed meeting.

Technical Analysis: DXY bullish momentum wanes, fails to hold above 200-day SMA

The Relative Strength Index (RSI) in flat and positive territory hints toward a neutral stance in the current market dynamics, not leaning distinctly toward either buyers or sellers. Paired with the flat green bars of the Moving Average Convergence Divergence (MACD), this suggests a minor bullish momentum waiting in the wings for DXY, especially as it implies a diminishing seller's market. 

The positioning of the DXY in relation to the Simple Moving Averages (SMAs) provides a more detailed picture of the market trend. The presence above the 20-day SMA reveals that buyers have basic control in the short term. However, The DXY’s positioning below the 100-day and 200-day SMAs indicates that sellers hold dominance in the long run. 

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