US Dollar gains traction as November’s FOMC minutes warns further tightening

• The DXY Index rose to 103.60, up by 0.15%.
• FOMC members considered that the progress on inflation is “limited”.
• The US yields are still down on the day, limiting the US Dollar’s advance.

In Tuesday’s session, the US Dollar Index traded with 0.15% gains around the 103.60 area as investors seemed to be spooked by the hawkish tone of the Federal Open Market Committee (FOMC) participants in the November minutes.

Recently, the US economy has shown indications of cooling inflation and a slowing labor market, leading to a positive response from markets in anticipation as they now are confident that the Fed won’t hike any more, significantly weakening the US Dollar and Treasury yields. The November minutes revealed that the bank needs to see “more” evidence of inflation cooling down to call it a victory and that the progress made on inflation was limited which provided some lift to the Greenback and turning somewhat the market’s hype.

Daily Digest Market Movers: US Dollar finds demand on hawkish minutes, focus shifts to economic data

• The US Dollar DXY Index rose towards 103.60.
• As FOMC members need to gather more evidence of inflation cooling down, the focus shifts to the next high-tier reports. Before the December meeting, the Fed will receive an additional job and inflation report from November which will likely set the pace of the next decisions.
• The 2, 5 and 10-year rates are still down on the day at 4.88%, 4.42% and 4.43%, respectively, which limit the Greenback’s upside.
• In the meantime, according to the CME FedWatch Tool, investors have already priced in a no hike in December and are betting on rate cuts sooner than expected in May 2024. A sizable minority is even betting on a rate cut in March.
• The US will release October’s Durable Goods data on Wednesday and November’s S&P Global PMIs on Friday.

Technical Analysis: US Dollar bears take a break, RSI still near 30

On the daily chart, the Relative Strength Index (RSI) stands flat near the oversold threshold, while the Moving Average Convergence Divergence (MACD) lays out flat red bars. Both indicators point to the bears taking a slight break ahead of the Thanksgiving holiday.

On the broader scale, the index is below the 20, 100 and 200-day Simple Moving Averages (SMAs), suggesting that sellers are still in charge of the broader scale.

Support levels: 103.30, 103.15, 103.00.
Resistance levels: 103.60 (200-day SMA), 104.20 (100-day SMA),104.50.