The US Dollar in the green in the aftermath of the heavy data dump at 13:30 GMT.

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• The US Dollar in the green in the aftermath of the heavy data dump at 13:30 GMT.
• Traders got little room to assess the numbers with ECB’s Lagarde set to speak.
• The US Dollar Index faces volalitity, though no realy breakout just yet.

The US Dollar (USD) is softening a touch, though very little, in the aftermath of the unchanged rate decision from the European Central Bank (ECB). The central bank remains data dependent and leaves no clues whatsoever on any possible rate cuts in the near future. Markets were bracing though for a communicated cut soon after ECB’s Chairman Christine Lagarde said in Davos that a cut near the summer is reasonable.

On the economic front, traders are still going through the data dump from 13:30 GMT. The US Gross Domestic Product for the fourth quarter was an upbeat surprise against expectations. Even the Durable Goods saw an upward revision from its previous number, where the weather conditions are biting a bit into the current performance. Only let-down number seems to be the weekly Jobless Claims that picks up on both the initial and continuing number.

The US Dollar Index (DXY) is, from a purely technical point of view, caught between two very important Simple Moving Averages. Those are the 55-day SMA near 103.17 and the 200-day SMA at 103.50, which acts as the floor and cap respectively. To make matters even worse, the floor (55-day SMA) is heading lower by the day, which opens up more downside than upside potential for the US Dollar in the near term.

Given the big batch of data released, with the possibility the ECB drops the ball in its communication, there remains still a case for the DXY to get through those two moving averages again and run away. Look for 104.41 as the first resistance level on the upside, in the form of the 100-day SMA. If that gets breached as well, nothing will hold the DXY from heading to either 105.88 or 107.20 – the high of September.

With the declining floor, more sell pressure could filter through into the price action. Price action could decline substantially should the US data release later this Thursday build a case for that move. This would see the DXY first drop to 102.60, at the ascending trend line from September. Once below it, the downturn is open towards 102.00.

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