• The US Dollar is back flirting with a break lower. 
• Traders are going into risk-on mode with German and EU PMI numbers improving.
• The US Dollar Index faces pressure on the 103-handle again.

The US Dollar (USD) slides lower against most major peers on Wednesday as markets send it lower. The initial moves came with German and European Purchasing Manager Indexes (PMIs), which in nearly all sectors showed improvement (though remaining in contraction territory). A further contraction in US PMI numbers later this afternoon could mean a meltdown for the Greenback. 

On the economic front, as already mentioned in the above paragraph, US PMI numbers are set to be released this afternoon. The Manufacturing number will be especially significant (it is expected to remain unchanged at 47.9). Seeing the current market move already, a further sell-off of the Greenback could be at hand and see the DXY slide lower. 

Daily digest market movers: US PMI on docket

• German Purchase Manager Index numbers pumped up the Euro against the US Dollar. German Manufacturing went to 45.4, coming from 43.3. 
• French Manufacturing PMI was an upbeat surprise as well, heading form 44.4 to 46.6.
• The US Mortgate Applicatoins from the Mortgage Bankers Association has already been released and came in at 3.7%, from 10.4% last week.
• Near 14:45 GMT S&P Global is due to release the Purchase Manager Index for major sectors in the US:
  • Manufacturing for January is expected to remain unchanged at 47.9.
  • Services are expected to head to 51.0 from 51.4.
  • Composite number was at 50.9 with no expectation pencilled in. 
• The US Treasury will place a 5-year Note in the market near 18:00. 
• Equity markets are in the green after the positive evolution in the German and EU PMI numbers. All European indices are up over 1%. In the US Netflix released better-than-expected subscription numbers, which sent the Nasdaq soaring ahead of the US opening bell. 
• The CME Group’s FedWatch Tool shows that markets are pricing in a 97.4% possibility for an unchanged rate decision on January 31, with a slim 2.6% chance of a cut.
• The benchmark 10-year US Treasury Note sinks lower and flirts with a break below 4% as risk on is back in the markets. 

US Dollar Index Technical Analysis: PMI ahead 

The US Dollar Index (DXY) is down after Europe reported two upbeat numbers in the Manufacturing PMI print. Though the two European numbers are still in contraction, this does not mean the EU is out of the woods yet, or is outperforming the US. This afternoon’s US PMI numbers could either eke out more losses for the Greenback if the numbers disappoint, or send the Greenback back to its earlier level in Asian trading if they surprise to the upside. 

There are some economic data points that could still build a case for the DXY to get through those two moving averages again and run away. Look for 104.44 as the first resistance level on the upside, in the form of the 100-day SMA. If that gets scattered as well, nothing will hold the DXY from heading to either 105.88 or 107.20 – the high of September.  

A bull trap looks to be underway, where US Dollar bulls were caught buying into the Greenback when it broke above both the 55-day and the 200-day SMA in last week's trading. Price action could decline substantially and force US Dollar bulls to sell their positions at a loss. This would see the DXY first drop to 102.60, at the ascending trend line from September. Once below it, the downturn is open towards 102.00