US Dollar sees losses following disappointing ADP data ahead of Fed decision

• The DXY Index trades with losses on Wednesday at 103.20.
• ADP Employment change figures were lower than expected in January.
• The Fed is expected to hold its policy unchanged in Wednesday’s meeting, messaging will be key.

The US Dollar (USD), as reflected by the DXY Index, is currently trading at 103.20, experiencing losses as a result of weak data from the Automatic Data Processing (ADP) Employment Change report for January. Markets remain cautious ahead of the announcement of the Federal Reserve (Fed) decision later in the session.

Market anticipation regarding the Fed's future decisions are shifting but remain restrained due to robust recent economic data, suggesting that earlier rate cuts are unlikely. The upcoming FOMC decision and jobs data are expected to further steer market sentiment and shape the easing cycle from the Fed.

Daily Digest Market Movers: US Dollar dragged down by disappointing ADP figures

• The ADP Employment Change for January reported by the US significantly missed expectations, with only 107K jobs added as compared to the consensus of 145K and previous figure at 158K.
• On Thursday, markets will receive additional weekly Jobless Claims data; and on Friday, January’s Nonfarm Payrolls figures.
• Market's perspective on the Federal Reserve's next move, as gauged by the CME FedWatch Tool, suggest that investors are confident that the bank won’t change its policy on Wednesday. As for now, markets are seeing the easing cycle starting in May.
• However, the bank’s messaging and tone may change those expectations, setting the pace of the US Dollar for the rest of the week.

Technical Analysis: DXY loses momentum, bulls fail to defend the 200-day SMA

The indicators on the daily chart are reflecting a mixed bag of signals. The Relative Strength Index (RSI), despite its negative slope, is in positive territory. This typically indicates dwindling bullish momentum as buyers lose strength. The Moving Average Convergence Divergence (MACD) presents a similar view as the diminishing green bars could suggest that buying momentum is struggling to keep up its pace.

The Simple Moving Averages (SMAs) reveal a somewhat bearish scenario in the larger picture. The DXY's position under both the 100 and 200-day SMAs showcases the bears' dominance in longer time frames. However, the index still remaining above the 20-day SMA reinforces that the bears still aren’t fully in command and will act as strong support in case of further downward movements.

Support Levels: 103.15, 103.00, 102.90.
Resistance Levels: 103.4 (200-day SMA),103.90,104.00,104.20.