US Dollar Index retreats towards 104.00 as yields dribble on mixed concerns over Fed, recession

• US Dollar Index retreats from intraday high, struggles to defend DXY bulls after snapping two-day downtrend.
• San Francisco Fed’s Researcher rules out US recession, mixed data probe hawkish Fed concerns.
• Receding optimism for China unlock announcements jostle with boring performance of yields to restrict DXY moves.

US Dollar Index (DXY) takes offers to reverse the early day gains around 104.20 as European traders brace for Wednesday’s work amid the holiday mood.

The sluggish markets also take clues from the lack of major data/events, as well as mixed concerns surrounding China and the Federal Reserve (Fed). However, receding hopes of the US economic slowdown keeps DXY bulls hopeful.

Earlier in the day, a Researcher from the Federal Reserve Bank of San Francisco’s Economic Research Department ruled out odds favoring the US economic slowdown for at least the upcoming two quarters.

Talking about the day, Monday’s US economic releases mentioned that the Good Trade Balance for November improved to $-83.3B versus $98.8B prior. However, the US S&P/Case-Shiller Home Price Indices for October dropped to 8.6% YoY versus 9.7% expected and 10.4% previous readings.

Elsewhere, the US raised doubts about China’s latest Covid-linked moves and probes the risk-on mood. The dragon nation initially ruled out the quarantine requirement for inbound travelers before stating that the nation will resume citizens' applications for ordinary passports for tourism and visits abroad from January 8, 2023. Even so, a US Official mentioned, per Reuters, that the US government may impose new COVID-19 measures on travelers to the United States from China over concerns about the "lack of transparent data" coming from Beijing.

While portraying the mood, the US Treasury yields remain stable while the stock futures print mild gains.

Moving on, a light calendar and lack of major macros may allow the DXY traders to pare recent gains. That said, the US Pending Home Sales for November which holds the market consensus of 0.6% versus -4.6% previous readings will decorate the calendar and should be eyed amid a lack of major data/events for fresh impulse. Even so, major attention will be on the concerns surrounding Fed and China, not to forget the US Treasury bond yields.

Technical analysis

Despite the latest failure to defend DXY bulls, Tuesday’s bullish Doji candlestick suggests further recovery unless the quote drops back below the recent low of 103.88.