The DXY Index is witnessing an uptick toward 102.60.

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• The DXY Index is witnessing an uptick toward 102.60.
• Headline and core CPI from December came in higher than expected.
• Investors are still confident that the Fed will cut in March.

The US Dollar (USD) Index has climbed to 102.60 as financial markets continue to grapple with the release of a hot US Consumer Price Index (CPI) report from December, which came in higher than expected. Dovish bets eased somewhat, but markets are still betting on the Federal Reserve (Fed) easing cycle to begin in March.

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. As long as this rhetoric predominates, the index’s upward potential is limited.

Despite the index’s location below both the 100 and 200-day Simple Moving Averages (SMAs), which suggests sustained pressure from the bears, the position of the index above the 20-day SMA is evidence that the bulls are gaining ground in this battle. This is clear from the uptick in buying momentum and indicates the potential for further short-term upside movements.

Secondly, the positive slope in the Relative Strength Index (RSI) corroborates this view. This signals that despite the recent bearish backdrop, buying momentum may be growing in strength, illustrating an increasing pressure from the bulls.

Lastly, the flat green bars on the Moving Average Convergence Divergence (MACD) provide further validation of this mixed sentiment. While the bars indicate a stillness in momentum, their green shade suggests a column of buying forces vying to tip the scale.

Taken altogether, the bulls appear to be gaining ground momentarily. However, the dominant bearish forces, given away by the positioning below the 100 and 200-day SMAs, must not be overlooked.

Support levels: 102.30, 102.00 (20-day SMA), 101.80.
Resistance levels: 102.70, 102.90, 103.00.

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