US Dollar gains as markets adjust on rate cuts, FOMC Minutes

• The market has priced out any more jumbo cuts and now expects 25 bps cuts in both November and December.
• FOMC Minutes showed no additional guidance, Fed members remain data-dependent.
• Markets will eye CPI readings on Thursday.

TheUS Dollar Index (DXY), which measures the value of the USD against a basket of six currencies, is gaining against almost all of its competitors as markets assess the Federal Open Market Committee's (FOMC) September Meeting Minutes. The Minutes showed that Fed members agreed not to lock themselves into an aggressive easing path.

Despite signs of moderation in the US economy, pockets of resilience remain. This mixed outlook has prompted the Federal Reserve (Fed) to adopt a data-driven approach in determining the pace of its monetary policy, which was confirmed by the release of the September Minutes.

Daily digest market movers: DXY up after FOMC Minutes, but CPI will be key

• Market has adjusted expectations for Fed easing with jumbo cuts priced out and 25 bps cuts expected in both November and December.
• Despite strong economic data, markets still price in 125 bps of easing over the next 12 months, indicating that further adjustment is needed.
• Economic momentum remains strong with little expected slowdown into 2025.
• Markets are gearing up for Thursday's inflation readings from the Consumer Price Index (CPI) for September.
• Moreover, September FOMC Minutes showed no additional insights and confirmed that the Fed will take a gradual approach regarding the pace of easing.
• In that sense, the USD will remain sensible to economic reports and CPI readings.

DXY technical outlook: Momentum surges as bulls take the reins

The Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) indicators both signal strong bullish momentum, suggesting the potential for further upside. While the short-term outlook has improved, the broader trend remains bearish due to the prevailing red signals.

Key support levels are identified at 102.30, 102.00 and 101.80, while significant resistance levels are seen at 103.00, 103.50 and 104.00.