US Dollar Index: Fed hawks fell short of impressing DXY bulls, US Q4 GDP eyed

• US Dollar Index prints four-day downtrend, renews intraday low of late.
• Fed hawks fail to impress DXY buyers amid talks of February’s 0.25% rate hike, policy pivot.
• Mixed sentiment in the market, China’s Lunar New Year holidays also help contrinu to the previous moves.
• Preliminary readings of January PMIs, US Q4 GDP will be crucial for fresh impulse.

US Dollar Index (DXY) stays depressed for the fourth consecutive day as sellers poke the 101.90 level during early Monday. In doing so, the greenback’s gauge versus the six major currencies portrays the market’s dovish bias for the Federal Reserve (Fed), despite the policymakers’ multiple attempts to convince of their ability to hike rates. Also exerting downside pressure on the DXY could be the cautious optimism in the market, as well as the softer US Treasury bond yields.

The latest comments from the US Federal Reserve (Fed) officials, ahead of a two-week ‘blackout period’ before the Fed meeting, favored further rate hikes and highlighted inflation fears inside the world’s biggest economy. Federal Reserve Governor Christopher Waller was the last from the US central bank speakers to cross the wires as he said, “He favors a 25 basis point rate hike at the upcoming meeting and continued policy tightening beyond that.”

However, the Wall Street Journal (WSJ) states that Federal Reserve officials are preparing to slow interest-rate increases for the second straight meeting and debate how much higher to raise them after gaining more confidence inflation will ease further this year.

The reason could be linked to the recent softer US Retail Sales and regional activity numbers that signaled the “soft landing” in the US.

Elsewhere, hawkish comments from the European Central Bank (ECB) officials and optimism surrounding China also exert downside pressure on the DXY, mainly due to the greenback’s haven appeal.

Amid these plays, the US Treasury bond yields remain depressed around the multi-day low while the stock futures print mild losses after the Wall Street benchmarks closed the week on a negative note.

Moving on, the first readings of January’s Purchasing Managers Indexes (PMI) for the key global economies will precede the US four-quarter (Q4) Gross Domestic Product (GDP) to entertain DXY traders. However, an absence of Fedspeak and Chinese traders may restrict the market moves.

Technical analysis

Unless crossing the previous weekly high surrounding 102.90, the DXY is on the way to testing May 2022 low near 101.30.