The DXY Index trades mildly higher at around 102.60.

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• The DXY Index trades mildly higher at around 102.60.
• Markets will remain quiet on Monday as US traders are on the sidelines celebrating MLK’s holiday.
• Investors digest last week’s inflation data from the US from December.

The US Dollar (USD) is enjoying slight gains with the DXY Index trading at 102.60, while US traders celebrate Martin Luther King Jr.’s holiday. No relevant highlights are expected in the session, and markets are still digesting last week’s US inflation readings from December.

The Fed’s dovish stance, based on welcoming the cooling inflation and projecting no rate hikes in 2024, has recently weakened the USD and seems to be offsetting the resilience of the US economy while other economic blocks are weakening. Despite higher CPI numbers, the market remains stubborn and expects the Fed to initiate its easing cycle sooner rather than later, and the soft PPI readings gave markets a reason to bet on a less aggressive approach.

From a technical analysis standpoint, the daily chart reflects that the index gained some traction. The positive slope in the Relative Strength Index (RSI) within positive territory suggests an increase in buying pressure. This optimistic aspect is echoed by the Moving Average Convergence Divergence (MACD) with its flat green bars pointing to a stabilization in bullish sentiment.

However, the index remains above the 20-day Simple Moving Average (SMA) but below the 100 and 200-day SMAs. This underpins a sense of bearish dominance in the broader trend, but bears need to raise their game to regain short-term control as the bulls have managed to keep the pair above the shorter-term SMA. Therefore, in the short-term technical outlook, it appears the bullish momentum has an upper hand despite bearish undertones due to the position on longer-term SMAs.

Support levels: 102.30, 102.00 (20-day SMA), 101.80.
Resistance levels: 102.70, 102.80, 103.00.

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