The US Dollar (USD) Index is presently grappling with losses, trading at 103.35 on the DXY, in response to the release of softer Personal Consumption Expenditures (PCE) data for December, which gave the doves hope of earlier rate cuts. In that sense, market expectations hint at a possible rate cut by the Fed in March. However, if economic growth sustains itself, a March rate cut seems unlikely. This is why bets have continued to shift toward the easing cycle beginning in May. In case the US continues to show resilience and markets delay expectations of the cuts, the downside is limited for the short term.
The indicators on the daily chart reflect a tussle between buying and selling pressure. The Relative Strength Index (RSI) showcases a negative slope yet remains in positive territory, hinting toward diminishing buying momentum. Thus, a potential shift toward sellers might be on the cards. In unison, the Moving Average Convergence Divergence (MACD) indicator is also signaling a decline in upward pressure as the green bars on the histogram have started to decrease.
On observing the position of the index relative to its Simple Moving Averages (SMAs), we notice a mix of buying and selling pressure. The DXY holding above the 20-day SMA suggests attempts by bulls to control the short-term market trend, even as lingering bearish undertones persist. The fact that the index is still below the 100 and 200-day SMAs, however, indicates that bears are maintaining a bullish grip on the broader context. The sellers seem to be dominating the narrative in the longer run, with the bulls struggling to gain ground. Support Levels: 103.30, 103.00, 102.80, 102.60 (20-day SMA). Resistance Levels: 103.50 (200-day SMA), 103.70, 103.90.
