US Dollar softens as Powell signals no urgency to change rates

• The US Dollar Index trades with losses for the second consecutive session on Tuesday, hovering above 108.00 without clear direction.
• Federal Reserve Chair Jerome Powell signals no urgency to adjust monetary policy, keeping markets in a cautious stance.
• The CME FedWatch Tool shows that markets are pricing in a hold at March's meeting.

The US Dollar Index (DXY), which measures the value of the US Dollar against a basket of currencies, remains down for the second day after hearing from the head of the US central bank. Federal Reserve (Fed) Chair Jerome Powell's testimony to Congress emphasized a data-dependent approach, indicating that rates will stay steady unless inflation or labor conditions shift. This notion reduced the chance of a rate cut at the March meeting.

Daily digest market movers: US Dollar loses traction after Powell's cautious testimony

• The main market mover on Tuesday was Powell's testimony before Congress, which wasn't as hawkish as expected and might have weakened the USD.
• The Fed Chair confirms no immediate changes to policy, keeping the 2% core inflation target intact.
• Powell acknowledges inflation is still somewhat elevated but emphasizes patience in adjusting monetary policy.
• He also highlighted concerns over long-term rates, stating they are driven by fiscal deficit and inflation expectations.
• Equities remain mostly flat with investors digesting Powell's neutral stance on interest rates and trade.
• The CME FedWatch Tool indicates a 90% probability that the Fed will maintain rates at 4.25%-4.50% in March.
• Elsewhere, the US 10-year yield climbs toward 4.55%, extending its rebound from a year-to-date low of 4.40% reached last week.
• In fact the Fed's sentiment index on the daily chart signlas that the bank's hawkish tone has eased somewhat.

DXY technical outlook: Dollar weakens as key support levels come into play

The US Dollar Index struggles to maintain momentum, slipping below the 20-day Simple Moving Average (SMA) around 108.50. The Relative Strength Index (RSI) is drifting lower, approaching bearish territory below 50, signaling declining momentum. The Moving Average Convergence Divergence (MACD) histogram is turning negative, indicating growing bearish traction.

If selling pressure intensifies, immediate support lies at 108.00, followed by the psychological level of 107.50. On the upside, resistance is seen at 108.80 and the 109.20 zone, which could cap short-term rebounds.