US Dollar holds ground ahead of key inflation data

• DXY trades with mild losses on Monday, hovering near the 105.85 level.
• Markets await November CPI data, which is expected to show slightly accelerating inflation.
• Fed's December rate cut is widely anticipated but seen as hawkish.

The US Dollar Index (DXY) began Monday’s session with mild losses, maintaining its position near the 105.80 level. Market participants are turning their attention to November’s Consumer Price Index (CPI) data, due Wednesday, which is expected to show annual headline inflation accelerating to 2.7% from 2.6%. 

Despite expectations of a December rate cut by the Federal Reserve (Fed), markets remain focused on the central bank's cautious stance amid sticky inflation concerns.

Daily digest market movers: DXY steadies ahead of CPI and Fed decision

• DXY trades near 106.00 as markets prepare for key data releases this week.November Consumer Price Index (CPI) is forecast to rise by 2.7% annually, up from 2.6% in October, while core CPI is expected to remain steady at 3.3%.
• The Fed's media blackout leaves no new commentary, but markets price in an 85% chance of a December rate cut.
• The Atlanta Fed GDPNow model projects Q4 growth at 3.3% SAAR, while the New York Fed's Nowcast shows 1.9% for Q4 and 2.4% for Q1.
• Last week’s jobs data showed strong results with November's Nonfarm Payrolls at 227K, well above expectations of 200K.Consumer Sentiment for December rose to 74, while inflation expectations eased slightly with the 5-year outlook falling to 3.1%.

DXY technical outlook: Bulls cautiously hold 106.00 level amid mixed signals

The DXY continues to hover near 106.00, showing mild strength despite ongoing concerns about sticky inflation and a dovish-leaning Fed. Key technical indicators remain mixed. The Relative Strength Index (RSI) is declining, approaching its neutral 50 level, suggesting waning bullish momentum. 

Meanwhile, the Moving Average Convergence Divergence (MACD) indicator shows red histogram bars, signaling bearish pressure as short-term moving averages lag behind longer-term ones.

Immediate resistance is seen at 106.50, with further hurdles near 107.00. On the downside, support is firm between 105.50 and 106.00. Wednesday’s CPI data will likely be the key driver for the index's next significant move, with a surprise potentially triggering volatility across the board.