US Dollar Index: DXY bears hold the reins near 102.00 ahead of US inflation, Fed Minutes

US Dollar Index (DXY) holds lower grounds near 102.10 early Wednesday, following the U-turn from a one-week high, as well as snapping a four-day winning streak, the previous day. In doing so, the greenback’s gauge versus the six major currencies portrays the market’s anxiety ahead of the top-tier data/events amid mixed catalysts.

That said, the US Consumer Price Index (CPI) for March and the Minutes of the latest Federal Open Market Committee (FOMC) Monetary Policy Meeting are in the spotlight as markets struggle for hawkish Fed signals.

Mixed comments from the Federal Reserve (Fed) officials raised doubts about the US central bank’s hawkish moves even if the International Monetary Fund (IMF) backed the major central banks’ fight against inflation.

On Tuesday, Philadelphia Fed President Patrick Harker said that the Federal Reserve will continue to look closely at available data to determine what, if any, additional actions they may need to take. Before him, New York Fed President John Williams said that if inflation comes down, we will have to lower rates. Furthermore, Chicago Fed President Austan Goolsbee, said on Tuesday that they need to be cautious about raising interest rates after recent development in the banking sector.

On the other hand, the IMF revised down global real Gross Domestic Product (GDP) growth forecast for 2023 to 2.8% from 2.9% in January's report. The global lender, however, forecasts 2023 US GDP growth at 1.6% vs 1.4% expected in January. “The International Monetary Fund warned on Tuesday that lurking financial system vulnerabilities could erupt into a new crisis and slam global growth this year, but urged member countries to keep tightening monetary policy to fight persistently high inflation,” said Reuters.

Elsewhere, the US-China tension and recently mixed US data, before Friday’s upbeat US jobs report, act as extra trading filters for the DXY amid cautious optimism in the market.

While portraying the mood, Wall Street closed with minor gains and the yields also marked a mild run-up while the CME’s FedWatch Tool signals a 64% chance of a 0.25% Fed rate hike in May versus 72.0% a day before.

Looking ahead, the US CPI for March, expected to ease to 5.2% YoY versus 6.0% prior, may weigh on the DXY if the FOMC Minutes fail to defend the hawkish bias.

Also read: US CPI Preview: US Dollar on the back foot and poised to fall further

Technical analysis

US Dollar Index reverses from a convergence of a 13-day-old resistance line and 21-day Exponential Moving Average (EMA), around 102.65 by the press time, to keep DXY bears hopeful.