US Dollar fluctuates amid escalating tensions between Russia and Ukraine, cooling dovish Fed bets

• The US Dollar Index trades with mild gains around 106.20.
• DXY is favored by a combination of factors, including Putin's threat on nuclear weapons usage.
• Fed officials have cooled on aggressive easing with Powell downplaying the need to be hasty.

The US Dollar Index (DXY), which measures the value of the USD against a basket of currencies, trades with mild gains around 106.20 on Tuesday, lifted by a combination of factors. The USD initially surged following Russian President Vladimir Putin's announcement that nuclear weapons could be used in conflicts with non-nuclear states supported by nuclear powers. 

However, the Greenback has eased somewhat as the release of Chinese economic data and details of the government's stimulus package have also contributed to the USD's mild retracement.

The US Dollar remains in an uptrend, supported by strong US economic data and market uncertainty regarding Federal Reserve (Fed) interest rate cuts. Despite a recent pullback due to profit-taking, DXY has sustained its momentum and reached yearly highs near 107.00. 

Daily digest market movers: US Dollar mixed, cooling dovish bets on the Fed favors the upside

• The US Dollar has eased from its recent highs as investors take profits after its recent rally against major currencies.
• Chinese economic data and details of the government's stimulus package contributed to the USD's mild pullback.
• Fed Chair Jerome Powell emphasized a cautious approach to rate cuts, highlighting the economy's strength.
• Other Fed officials, including Kugler, echoed Powell's message, stressing the need to monitor both inflation and unemployment.
• Market expectations for a December rate cut have declined in response to Powell's comments. 
• On the data front, Housing Starts in the US dropped by 3.1% in October, reaching 1.311 million units, according to Tuesday’s monthly report from the US Census Bureau. 
• Building Permits fell by 0.6% in October after a revised 3.1% decrease in September, which was initially reported as a 2.9% decline.

DXY technical outlook: Consolidation follows rise to annual high, overbought levels raise reversal concerns

The DXY has been in an uptrend of late, influenced by strong economic data and the Fed's cautious statements. Despite reaching a 52-week high, profit-taking has caused a slight pullback, suggesting the possibility of consolidation. 

Technical indicators, including the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD), remain positive but are flat, indicating consolidation. Additionally, the index is overbought, raising concerns about a potential reversal.