US Dollar stabilizes near key levels ahead of Trump inauguration, data releases and Fed signals

• President-elect Donald Trump is expected to unveil a range of executive directives designed to jumpstart fiscal measures, tariffs and stimulus actions.
• Robust housing figures, including rising permits and starts, suggest that the United States economy remains on solid footing into the new year.
• Markets assess fresh Fed officials' clues.

The US Dollar consolidates further at current levels on Friday, with the US Dollar Index (DXY) holding around 109.00 and searching for direction. Markets are left clueless after Federal Reserve's (Fed) Waller comments suggesting a March rate cut is still in the cards while markets assess fresh low-tier data ahead of Trump's inauguration.

Daily digest market movers: USD recovers some ground ahead of Trump's inauguration, Fed's signals

• Fed Governor Christopher Waller offered a more dovish tone, highlighting favorable inflation results that could warrant a rate reduction in the near term, mentioning that a rate cut in March remains a possibility if incoming data support further price moderation.
• Treasury Secretary nominee Scott Bessent emphasized the need to preserve the US Dollar's global reserve currency status and defended the idea of an independent Federal Reserve, while also suggesting that any pass-through from tariffs to consumer prices might be partially offset by exchange rate shifts.
• On the data front, minor data including Building permits and housing starts surpassed many analysts' expectations, while industrial output rebounded notably, underscoring ongoing US economic momentum.
• Equity markets remain buoyant, with US stocks gaining more than 1% intraday, potentially reflecting optimism about the new administration's aggressive policy agenda.
• CME FedWatch Tool shows that markets have roughly priced in that rates will remain on hold at the upcoming policy meeting, as the central bank waits to interpret new data and evolving political factors.

DXY technical outlook: Rebounding from profit-taking, eyeing multi-year highs

After profit-taking briefly dragged the Greenback lower, the US Dollar Index managed to reclaim territory above 109.20. Despite intermittent selling, the DXY remains near multi-year peaks as fundamental indicators continue to support the Dollar's uptrend. Significantly, the 20-day Simple Moving Average has repelled sellers, serving as a robust foothold for bulls.

While a short-term dip is plausible should new data or policy announcements disappoint, the prevailing technical structure implies that buyers may swiftly reemerge to defend the Dollar's momentum.