US Dollar trades flat, Fed officials hint at fewer rate cuts in 2024

• The DXY stood around 104.15 on Wednesday.

• Fed’s Collins, Kashkari and Kugler were on the wires sounding somewhat hawkish.

• US Treasury yields are slightly up and limit the Greenback’s losses.

The US Dollar Index (DXY) is trading neutrally at 104.15 on Wednesday, while markets assess several Federal Reserve (Fed) officials' statements to continue placing their bets on activity at the next few Federal Open Market Committee (FOMC) meetings.

The US Federal Reserve's hawkish hold, justified by a robust jobs report and continuous strong growth in Q1, has made dovish bets on the Fed less attractive over the past week. As a reaction, the USD strengthened on the back of rising US Treasury yields as markets are giving up on a first rate cut arriving in March.

Daily digest market movers: US Dollar holds its ground as markets assess Fed officials’ comments

• Fed’s Adriana Kugler noted that the job on inflation isn’t quite done, but that at some point when the economy cools down, the bank will consider rate cuts.

• Elsewhere, Neel Kashkari stated that two to three rate cuts in 2024 seem appropriate.

• In line with those comments, Susan Collins also cautioned that the bank needs more data to support rate cuts.  

• The CME's FedWatch Tool hints at reduced odds for a rate cut in March, which currently stands at 20%. Those odds rise to 50% for the May meeting, but the probabilities of a hold are also high.

Technical analysis: DXY falls below the 100-day SMA, but bulls trim daily losses

The technical indicators on the daily chart reflect a somewhat neutral to bearish short-term momentum. The Relative Strength Index (RSI) paints a picture of weakening bullish momentum, given its negative slope, despite being in positive territory. This condition normally precedes a potential reversal or pullback as the buying force starts to lose its grip.

In the bigger picture, the Simple Moving Averages (SMAs) continue to favor the bulls. Despite the selling pressure pulling the asset below the 100-day SMA, it is comfortably residing above both the 20-day and 200-day SMAs. This demonstration implies that the overall buying force remains dominant. 

These signals suggest while the buyers seem to be taking profits, further downside can be expected in the short term. But as long as the bulls defend the mentioned SMAs, the longer-term outlook will be bright.