The US Dollar (USD) is still facing selling pressure with markets currently tilting towards six rate cuts in 2024. Markets are fully ignoring the messages nearly every US Federal Reserve member brought in the aftermath of the last US Fed rate decision in December. It looks that six cuts are nearly fully priced in, which means the US Dollar weakness is running on a near-empty gas tank. On the economic front, the Richmond Manufacturing data is a big miss on expectations. With a decline to -11, coming from -5, the Index is hitting the lowest level since June. This moves the US Dollar substantially weaker against most major peers.

The US Dollar Index looks incapable of recovering soon from the current downturn since November. Traders should be warned that these days between Christmas and New Year usually exhibit thin liquidity and a low number of market participants being present in the markets. Should the US Dollar be able to hold the current position in the DXY, some recovery could be at hand once traders come back in January.

First upside resistance to face is near 101.78 at the low of December 21st. Although a long way to go, it looks not unthinkable that the DXY might test the descending trend line near 103.00. Depending on the catalyst that fuels the recovery in the Greenback, the 200-day Simple Moving Average (SMA) near 103.45 is firm last resistance before having more upside. To the downside, the pivotal level at 101.70 – the low of August 4 and 10 – is vital to hold and could still see a close this week. Once broken, look for 100.82, which aligns with the bottoms from February and April. Should that level snap, nothing will stand in the way of DXY heading to the sub-100 region.