US Dollar up with Nasdaq down.

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The US Dollar (USD) is showing a steady performance in the European trading session on Tuesday. It’s making gains against most G20 currencies, though the DXY US Dollar Index indicates a slight easing of the Greenback. This comes amidst a positive shift in market sentiment, as evidenced by a strong performance in US equity markets on Monday and a surge in Asian stocks, particularly with the Japanese Nikkei Index hitting a 34-year high.

In terms of economic events, the agenda remains light for Tuesday, with secondary data releases expected. However, there’s anticipation around the speech by Federal Reserve’s Vice Chairman Michael Barr later in the day. The market is in a holding pattern ahead of the US Consumer Price Index (CPI) report due on Thursday.

In recent economic news, the National Federation of Independent Business (NFIB) released its Business Optimism Index for December, showing a rise from November’s 90.6 to 91.9. Meanwhile, European Central Bank (ECB) member Mário Centeno hinted at the possibility of an earlier-than-expected rate decision, citing favorable December inflation figures. This led to a slight weakening of the Euro against the USD.

The US Trade Balance numbers for November were also released, showing a slight improvement in both goods trade balance and goods and services trade deficit compared to October. Additionally, the US Redbook index for the first week of January rose from 5.6% to 5.9%.

In the equity markets, there’s a mixed sentiment on Tuesday. Asian markets ended on a positive note, while European stocks are showing uncertainty. US equity futures are slightly down. According to the CME Group’s FedWatch Tool, there’s a strong expectation that the Federal Reserve will maintain interest rates at the upcoming January 31 meeting.

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The benchmark 10-year US Treasury Note is hovering around 4%, but there’s a growing consensus among investors and banks for a potential downward revision.

From a technical perspective, the US Dollar Index (DXY) shows a marginal gain against major currencies, balancing safe-haven inflows with risk-on sentiments. With key inflation data due on Thursday, significant movements in the US Dollar are unlikely unless triggered by major news or unexpected events.

Technical analysis of the DXY indicates resistance at the 103.00 level, aligning with a descending trend line from early October and December. A break above this could lead to the 200-day Simple Moving Average (SMA) at 103.43 coming into play, with further resistance at the 103.93 level (55-day SMA). On the downside, a rejection at the descending trendline could fuel a downturn, with a critical support level at 101.74. A breach of this level might lead to a test near the 100.80 low.

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