US Dollar consolidates further as markets gear up for increased volatility

• The US Dollar trades flat ahead of the release of Nvidia earnings and the Fed Minutes.
• Volatility around the Greenback could pick up with plenty of economic data points on Thursday.
• The US Dollar Index trades in a tight range, respecting nearby support and resistance levels.

The US Dollar (USD) is drifting as markets await a volatile 24 hours ahead which will commence with the release of the Federal Reserve (Fed) Minutes from the recent Federal Open Market Committee (FOMC) decision on why they kept rates stable. Even as the report can be a market-moving event, not much is expected this time as traders have heard from plenty of Fed speakers since Monday, all roughly advocating to keep interest rates at the current levels with no hikes foreseen. After that, the much-anticipated earnings from Nvidia (NVDA) could set the tone for either risk on or risk off ahead of Thursday, when a lot of US data points will be released. 

On the economic data front, a rather light Wednesday ahead with Existing Home Sales as a single big data point to be released. More activity is expected on Thursday, when the usual Jobless Claims numbers will be published. 

Daily digest market movers: Gear up for some volatility

• Markets were caught by surprise by the inflation data from the United Kingdom. Monthly headline inflation picked up by 0.3% against 0.6% previous, more than the 0.1% expected. This sees markets repricing most major currencies a bit on the initial rate cut expectations from central banks. 
• Wednesday’s US calendar will kick off with the Mortgage Bankers Association Survey for the Mortgage Applications for this week. Last week saw a steady 0.5% increase, with no forecast pencilled in.
• At 12:40 GMT, Federal Reserve Bank of Chicago President Austan Goolsbee delivers opening remarks at the Holding Company Symposium hosted by the bank.
• At 14:00 GMT, Existing Home Sales numbers for April will be released. In March, home sales declined by 4.3%.
• Nvidia Earnings are expected near 16:00 GMT and could set the risk tone further for the rest of the trading day.
• Near 17:00 GMT, the US Treasury will allot a 20-year bond auction in the market. 
• At 18:00 GMT, the Fed Minutes will be released.
• Equities are retreating again despite US indices eking out gains on Tuesday. 
• The CME Fedwatch Tool is seeing a shift in pricing with the June projections near 98.4% for no change in the policy rate against 1.6% chance of a hike. September futures are now seeing a 50.6% chance for a 25-basis-points cut. 
• The benchmark 10-year US Treasury Note trades around 4.44%, near the high for this week.

US Dollar Index Technical Analysis: Steady ahead of the storm

The US Dollar Index (DXY) trades nearly in a standstill ahead of some market-moving elements that are hard to preposition for in advance. Nvidia earnings might be the main event even for this Wednesday as they have the capacity to decide the overall market mood. The fact that a single stock’s earnings could determine the risk tone for the remainder of the US trading session might see traders chasing the trade and moving the US Dollar Index in an unusual direction. 

On the upside, the DXY Index is already near a chunky resistance level. The first level to recover is the 55-day Simple Moving Average (SMA) at 104.74. Further up, the following levels to consider are 105.12 and 105.52. 

On the downside, the 100-day SMA around 104.22 is the last man supporting the decline. Once that level snaps, an air pocket is placed between 104.11 and 103.00. Should the US Dollar decline persist, the low of March at 102.35 and the low from December at 100.62 are levels to consider.