The US Dollar (USD) is seeing its status as King within reach with the US Dollar Index (DXY) popping above a few important technical levels. The move comes with markets finally realizing that rate cuts will not take place before June for either the US Federal Reserve (Fed), the European Central Bank (ECB) and the Bank of England (BoE). US Federal Reserve member Christopher Waller backtracked on his comments from early November and nuanced that rate cuts will come, though only when inflation does not pick up again. On the economic front there will be a lot to digest, with an upbeat Retail Sales print for December. Meanwhile headlines are being released out of Davos where the World Economic Forum (WEF) is taking place. When that is still not enough, traders can dig their teeth into no less than three Fed speakers throughout this Wednesday.
The US Dollar Index (DXY) has made a run for it and is trading near the mid-103 area. A crucial point with no less than two important moving averages being nearby and both just a few pips away from each other. From a pure technical angle, if the DXY can pull off a daily close above these two moving averages, the Greenback can gain no less than 1% towards 104.45. The DXY is trading near the 55-day and the 200-day Simple Moving Averages (SMA) at 104.45. In case the DXY can get through that area, look for 104.44 as the first resistance level on the upside, in the form of the 100-day SMA. If that gets scattered as well, nothing will hold the DXY from heading to either 105.88 or 107.20, the high of September. The break from this Wednesday could turn into a bull trap, where US Dollar bulls are caught buying into the Greenback when it broke above both the 55-day and the 200-day SMA in early Wednesday trading. Price action would decline substantially and force US Dollar bulls to sell their position at a loss. This would see the DXY first drop to 102.60 at the ascending trend line from September. Once threading below it, the downturn is open to head to 102.