US Dollar Index (DXY) holds steady above mid-99.00s; upside potential seems limited

• The US Dollar struggles to attract any meaningful buyers amid a combination of diverging forces.
• Fed rate cut bets counter a development towards reopening the US government and cap the buck.
• Traders also seem reluctant amid a US bank holiday and opt to wait for Fed speeches on Wednesday.

The US Dollar Index (DXY), which tracks the Greenback against a basket of currencies, holds steady above mid-99.00s through the Asian session on Tuesday, though it lacks bullish conviction. Moreover, the fundamental backdrop seems tilted in favor of bearish traders and warrants some caution before positioning for any meaningful appreciating move.

The Senate late on Sunday reached a compromise and moved forward on a measure aimed at ending the longest US government shutdown in American history that began on October 1. The US Dollar (USD), however, struggles to attract any meaningful buyers as investors await a flood of delayed data to shed more light on growth amid fears about an economic fallout from the US government closure. This, in turn, is holding back traders from placing aggressive bullish bets and acting as a headwind for the USD.

Meanwhile, investors seem tilted towards a more dovish US Federal Reserve (Fed), which turns out to be another factor that contributes to capping the upside for the Greenback. According to the CME Group's FedWatch Tool, markets now see an over 60% chance of another rate cut by the Fed in December. The bets were lifted by the University of Michigan's Survey on Friday, which showed that the US Consumer Sentiment Index slumped to 50.3 in November, or the lowest level since June 2022, from 53.6 in the previous month.

US banks will be closed on Tuesday in observance of Veterans Day, leaving the USD at the mercy of Fed rate cut expectations. Hence, the market focus will remain glued to speeches from influential FOMC members on Wednesday. Traders will look for more cues about the Fed's future rate-cut path, which, in turn, will continue to play a key role in driving the USD demand in the near term.