US Dollar sees slight Friday downfall as buyer momentum dwindles

• DXY Index demonstrates slight losses yet sustains near early November highs.
• The downward movements may be seen as buyers running out of momentum.
• Hawkish bets on the Fed and a sour market mood may limit the losses.

The US Dollar Index (DXY) is currently trading at 106.09, a mild loss from its recent peak of 106.35. Despite this, the index remains geared toward testing its November 1 high of 107.10. However, the outlook for the Greenback remains positive as Middle East tensions and hawkish bets on the Federal Reserve (Fed) may drive demand back to the USD.

The US economy exhibits robust growth with persistent inflation, which made the Fed change its messaging to a more hawkish one, triggering a rally of US Treasury yields and hence benefiting the US Dollar.

Daily digest market movers: DXY slightly corrects, while outlook remains positive

• Higher Middle East tensions cultivate risk-off sentiment, affecting global markets.
• Fundamentals and hawkish Federal Reserve (Fed) rhetoric ensure the US Dollar's uptrend continues.
• For the next Fed meeting, signs show some officials considering rate hikes, a major departure from the previous intentions of rate cuts. This could significantly impact markets if market pricing realigns itself to this new direction.
• In the US Treasury bond market, the 2-year, 5-year, and 10-year bond yields are all falling. Specifically, the 2-year yield trades at 4.97%, the 5-year at 4.65%, and the 10-year at 4.60%, but all remain near multi-month highs.
• The first rate cut is now expected to hurdle past the May, June, and July meetings to appear in September.

DXY technical analysis: DXY showing bearish momentum, but bulls are still in the game

On the daily chart, The Relative Strength Index (RSI) operates in positive territory but exhibits a negative slope, implying that a move down is possible and reflects bearish momentum. Concurrently, the Moving Average Convergence Divergence (MACD) underscores this sentiment as the decreasing green bars suggest an imminent bearish crossover, highlighting ongoing selling momentum.

However, despite short-term downward pressures, the bulls have not yet thrown in the towel. This is substantiated by the DXY's position above the 20, 100, and 200-day Simple Moving Averages (SMAs), which indicates that bulls still have control over the overall trend.