US Dollar declines on quiet Monday, markets await drivers

• The US Dollar Index softens towards 107.00.
• Profit-taking after steep rallies in November pressured Greenback lower.
• Expectations for a lower U.S. corporate tax rate and a wave of deregulation should boost foreign portfolio and FDI flows to the US.

The US Dollar Index (DXY) retreated from its fresh two-year high on Friday, softening towards 107.00. The US calendar won't feature any major highlights on Monday's session. 

The US Dollar Index (DXY) remains bullish despite a recent pullback from a two-year high. Strong economic data and a less dovish Federal Reserve stance support the index's upward trajectory. In addition, geopolitical jitters from the Russian-Ukraine war has contributed to the upside.

Daily digest market movers: US Dollar firm despite pullback, Trump's policies might favor the upside

• The robust U.S. economy is outperforming other advanced economies. 
• Trump's proposed policies will likely prolong Fed's restrictive policy and  the US is anticipated to see increased foreign investment due to potential tax cuts and deregulation. 
• Higher real interest rates are predicted due to the U.S.'s favorable productivity landscape.
• For the rest of the week, investors will eye Gross Domestic Product (GDP) and Personal Consumption Expenditures (PCE) figures to be released on Thursday and Friday as they might shake the USD's ground.
• Jobless Claims on Thursday will also be important.

DXY technical outlook: Index consolidates after retreat from highs, bullish bias intact

Technical indicators suggest a possible consolidation period due to overbought conditions, with the Relative Strength Index (RSI) easing from overbought levels and the Moving Average Convergence Divergence (MACD) histogram contracting. Despite the consolidation, the overall bullish trend remains intact, with resistance at 108.00 and support at 106.00-106.50 area. Bulls must hold this area to maintain the bullish momentum.