US dollar experiences mild losses ahead of PCE data

The Dollar Index, or DXY, is trading at roughly 103.20 and is slightly down. This week’s important US inflation and economic activity reports are due. The market’s predictions about the Fed’s rate cuts keep changing.

At 103.25, the dollar is presently trading slightly lower. This small decline is due to a calm session before a busy week.

Core Personal Consumption Expenditures (PCE), which are scheduled for release on Friday, could influence the Fed’s short-term projections.

The US economy is still strong, with continually solid statistics pointing to possible growth in Q4 2024 and probably stability in Q1. The market is now expecting about 125 basis points (bps) of relaxation from the Federal Reserve over the course of 2024, down from the nearly 175 bps previously expected, which helped the Greenback earlier in January.

The US will release its December Personal Consumption Expenditures (PCE) data on Thursday. It is anticipated that the data will indicate a stagnation in inflation. That day also marks the release of the Q4 GDP data, and markets anticipate a slowdown in economic growth.

US Treasury yields are in a downturn with the 2-year yield at 4.37%, the 5-year yield at 4.02%, and the 10-year yield at 4.10%. The CME FedWatch Tool indicates the odds of a rate cut in March have fallen to 50%. No policy changes are expected in next week’s Fed meeting.

Technically; the Dollar Index’s bullish momentum wanes, fails to hold above 200-day SMA. The Relative Strength Index (RSI) in flat and positive territory hints toward a neutral stance in the current market dynamics, not leaning distinctly toward either buyers or sellers. Paired with the flat green bars of the Moving Average Convergence Divergence (MACD), this suggests a minor bullish momentum waiting in the wings for DXY, especially as it implies a diminishing seller’s market.

The positioning of the DXY in relation to the Simple Moving Averages (SMAs) provides a more detailed picture of the market trend. The presence above the 20-day SMA reveals that buyers have basic control in the short term. However, The DXY’s positioning below the 100-day and 200-day SMAs indicates that sellers hold dominance in the long run.

Support levels: 103.20, 103.00, 102.80.
Resistance levels 103.40 (200-day SMA), 103.60, 103.80.