U.S. dollar steady as Fed officials suggest fewer 2024 rate cuts

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The US Dollar Index (DXY) remained stable at 104.15 on Wednesday as the market analyzed the comments from various Federal Reserve (Fed) officials. Fed’s Collins, Kashkari, and Kugler expressed somewhat hawkish sentiments, contributing to a slight increase in US Treasury yields and limiting the Greenback’s losses. The robust jobs report and continuous strong growth in Q1 have made dovish bets on the Fed less appealing, leading to a strengthening of the USD and a reduction in the odds for a rate cut in March.

Fed’s Adriana Kugler stated that the job on inflation isn’t quite done, but at some point when the economy cools down, the bank will consider rate cuts. Neel Kashkari mentioned that two to three rate cuts in 2024 seem appropriate, while Susan Collins cautioned that the bank needs more data to support rate cuts. The CME’s FedWatch Tool also indicated reduced odds for a rate cut in March, with a 20% probability, rising to 50% for the May meeting.

On the technical analysis front, the US Dollar’s daily chart reflected a somewhat neutral to bearish short-term momentum. The Relative Strength Index (RSI) exhibited weakening bullish momentum, while the Simple Moving Averages (SMAs) continued to favor the bulls. Despite the asset falling below the 100-day SMA, it remains comfortably above both the 20-day and 200-day SMAs, suggesting that the overall buying force remains dominant. Hence, while short-term downside can be expected, as long as the bulls defend the mentioned SMAs, the longer-term outlook will remain positive.

In conclusion, the US Dollar Index (DXY) is currently holding its ground as market players digest the latest comments from Fed officials, leading to a neutral to bearish short-term momentum while the longer-term outlook remains positive as long as key support levels are maintained.

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