The US Dollar pulls the sponge over earlier deep red losses after the publication of the Fed Minutes.

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• The US Dollar pulls the sponge over earlier deep red losses after the publication of the Fed Minutes.
• Market sentiment improves after Nvidia earnings beat and a fresh all-time high for the Japanese Nikkei.
• The US Dollar Index falls sharply below 104.00, and bears try to break the heavy-weight 200-day SMA.

The US Dollar (USD) is returning back to flat after a dropkick moment on Thursday after a string of events accelerated a downside move in the US Dollar Index (DXY) overnight. The first decline came on the back of the US Federal Reserve releasing the Minutes of its January meeting. The decrease came even though several participants in the Federal Open Market Committee (FOMC) expressed their concerns about cutting rates too quickly, having learned their lessons from the former policy mistake made in the 1980s by Fed Chairman Paul Volcker. With the DXY hammered, a second selling wave for the Greenback took place after Nvidia posted jawbreaking earnings, spilling the upbeat market mood into Asia, where the Japanese Nikkei hit all-time highs.

On the economic data front, a very chunky calendar ahead on Thursday with some leading indicators. Apart from upbeat US Jobless Claims, the Purchase Manager Index numbers are not really moving the needle with one upbeat element and another undershooting expectatoins. So the upbeat Jobless data is not seeing follow through.

The US Dollar Index (DXY) retreated below 104.00 overnight. Although concerns amongst Fed members about premature interest-rate cuts is the main takeaway from the Fed Minutes, markets see it as being on track for their June timing for a rate cut. Meanwhile, Nvidia earnings have sparked a wave of risk appetite across the globe, that sentiment is a second driver for an abating Greenback this Thursday. Later today, US PMI numbers could take back some of the recent losses.

To the upside, the 100-day Simple Moving Average (SMA) near 104.98 is the first level to watch as a support that has been turned into a resistance. Should the US Dollar jump to 105.00 on the back of strong PMI numbers, 105.12 is a key level to keep an eye on. One step beyond there comes 105.88, the high of November 2023. Ultimately, 107.20 – the high of 2023 – could even come back into scope, but that would be when markets reprice the timing of a Fed rate cut again, delaying it to the last quarter of 2024.

The 200-day Simple Moving Average at 103.72 has been broken and should see more US Dollar bears flock in to trade the break for a weaker US Dollar. The 200-day SMA should not let go that easily, so a small retreat back to that level could be more than granted. Ultimately, it will lose its force with the ongoing selling pressure and could fall to 103.16 at the 55-day SMA.

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