US Dollar trades in red as traders await CPI data outcome

• DXY Index is currently trading at 104.15  with mild losses.
• March’s CPI report is due on Wednesday, investors will monitor its outcome for more direction on the economy's health.
• Markets still expect the Fed’s easing cycle to start in June.

The US Dollar Index (DXY) is currently trading at a modest loss at the 104.15 level. Mild market fluctuations for the USD continue to make waves as the Federal Reserve’s (Fed) cautious stance is calibrated in light of incoming data. Hot labor market figures reported last week may justify the delay of the easing cycle, while Fed officials ask for patience.

The US economy has yet to show clear evidence of a moderation of inflation and economic activity, which makes the Fed comfortable to start cutting rates. In case data shows a resilient economy and easing expectations adjust, the USD may see further upside.

Daily digest market movers: DXY losses limited by US economy strength and rising Treasury yields 

• Given the current steady expansion and continued inflation in the US economy, the Fed stays wary of modifying monetary policy and its officials ask for caution. 
• Markets are still pricing in higher odds of around 60% of the easing cycle to start in June.
• US Treasury bond yields demonstrate a slight increase. The 2-year yield stands at 4.78%, the 5-year at 4.41%, and the 10-year at 4.33%.
• On Wednesday, the US will release Consumer Price Index (CPI) data from March, a crucial inflation indicator.
• The headline figure is seen accelerating, while the core measure is seen cooling down. The outcome of the index will likely fuel volatility in the USD dynamic via movements in Treasury yields and Fed expectations.

DXY technical analysis: DXY bulls remain weak with bears around the corner

The indicators on the daily chart reflect a mixed sentiment in the market. The Relative Strength Index (RSI) has a negative slope but maintains itself in positive territory, indicating that there's uncertainty among the market participants and a lack of a firm directional bias.

In addition, there may be a hint of bearish momentum as the Moving Average Convergence Divergence (MACD) indicator shows decreasing green bars, signifying a possible slowdown in the buying power. This could mean that the bears are slowly gaining the upper hand. However, the DXY is positioned above its 20, 100 and 200-day Simple Moving Averages (SMAs), insinuating an underlying bullish sentiment.