US Dollar strengthens as market continues digesting CPI data, eyes now toward Retail Sales

• US Dollar finding buyers as markets are pricing in fewer cuts in 2024.
• Thursday's Retail Sales will be key for market bets.
• Strong US data later in the week could continue pushing the DXY higher.

The US Dollar Index (DXY), which measures the value of the USD against a basket of six currencies, continues rising as markets are giving up their hopes of two cuts by the Federal Reserve (Fed) this year.

The US economy displays mixed signals, exhibiting both signs of a slowdown and resilience. The Fed has indicated that it will monitor incoming data to adjust the pace of its monetary easing policy accordingly.

Daily digest market movers: US Dollar adds more ground on quiet Monday

• Fed easing expectations tempered by strong jobs and CPI data with fewer rate cuts priced in.
• Fed speakers hold cautious stance on rate cuts and remain data-dependent.
• Headline September CPI rose as expected last week, while core CPI was slightly higher than anticipated.
• The super core rate remained unchanged at 4.3% YoY, indicating persistent price pressure.
• US Retail Sales data on Thursday is projected to show continued consumer spending strength supported by favorable economic conditions.
• Business inventories and industrial production reports on Thursday will provide insight into overall economic activity.

DXY technical outlook: DXY maintains bullish momentum, approaching overbought conditions

The DXY index maintains upward momentum with indicators suggesting overbought conditions near the crucial 100-day SMA. That being said, the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) are approaching overbought territory, signaling a potential pullback.

Supports are located at 103.00, 102.50 and 102.30, while resistances are found at 103.30, 103.50 and 104.00.