The DXY Index declines toward 102.15, challenging 20-day SMA.
Lower US Treasury yields weigh on the Greenback.
Investors eye Wednesday’s CPI data from the last month of 2023.
The US Dollar (USD) is currently trading at the 102.15 area, seeing losses due to bulls struggling to sustain the momentum gained last week. Monday’s calendar has nothing relevant to offer, and the focus is set on the Consumer Price Index (CPI) figures from December, due on Wednesday.
In its last 2023 meeting, the Federal Reserve (Fed) mirrored a dovish stance, welcoming moderating inflation and projecting no rate hikes in 2024 alongside a forecasted 75 bps of easing. Current market expectations predict a March rate cut and another in May, hinging on December's CPI report. This dovish posture, coupled with anticipation of impending rate cuts, contributes to a weaker US dollar as lower interest rates decrease foreign investment appeal.
Daily digest market movers: US dollar hesitates ahead of CPI
The US Dollar is struggling to hold last week's gains, which closed 1% up on Friday.
Markets await key inflation data, which is expected to have picked up in the last month of 2023. The core measure is forecasted to be 3.8% YoY.
US Treasury yields experienced a drop, with the 2-year yield at 4.32%, the 5-year yield at 3.94%, and the 10-year yield at 3.98%, adding pressure to the USD.
According to the CME FedWatch Tool, the Federal Reserve's easing expectations also started to adjust last week. Five rate cuts are now priced in for 2024. Investors are pricing in a hold at the upcoming January meeting but anticipate higher chances of rate cuts in March and May.
Technical Analysis: DXY bears step in as bulls continue weak showing
The indicators on the daily chart reflect a bearish outlook for the USD. The Relative Strength Index (RSI) is currently demonstrating a negative slope in negative territory, which is backed by the bearish sentiment indicated by the Simple Moving Averages (SMAs) and the Moving Average Convergence Divergence (MACD) indicator’s rising red bars.
The index's position above the 20-day SMA while below the 100 and 200-day SMAs indicates that buying pressure is losing momentum to selling pressure in the medium and long-term time frames. This is a signal that the bears are maintaining some dominance
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