US Dollar falls flat on quiet Tuesday

• US Dollar Index remains neutral on Tuesday near the key 103.00 level.
• Fed officials remain cautious about easing policy too much, too soon.
• CPI figures on Thursday will be key for DXY movement.

The US Dollar Index (DXY), which measures the value of the USD against a basket of six currencies, remains flat on Tuesday. Despite the initial surge, the DXY has settled around 102.50 and is awaiting further direction.

Economic indicators suggest mixed signals for the US economy. While some data points to a slowdown, other metrics indicate ongoing resilience. The Federal Reserve (Fed) has emphasized that its approach to monetary policy easing will be guided by incoming economic data, suggesting a cautious stance that will depend on the evolving economic landscape.

Daily digest market movers: US Dollar flat as Fed bets adjust, CPI looms

• Fed officials remain cautious, emphasizing the risks of premature easing and indicating further gradual rate cuts may be appropriate.
• The probability of a 50 bps cut in November or December is now zero, and a 25 bps cut next month is only 90% priced in.
• Despite strong economic data, the market still anticipates 125 bps of total easing in the next 12 months.
• Consumer Price Index (CPI) data on Thursday might shake the USD dynamics and the next bets on the Fed.

DXY technical outlook: DXY paused in upward momentum, resistance caps upside

Technical analysis of the DXY index indicates a temporary pause in upward momentum after a recent winning streak. The Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) indicators remain firmly in positive territory, suggesting potential for further gains. While the short-term outlook has improved, the overall bias remains bearish for the USD.

Key support levels rest at 102.30, 102.00 and 101.80, while resistance levels stand at 103.00, 103.50 and 104.00.