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After posting gains on Wednesday afternoon and yesterday, the US Dollar (via DXY Index) finds itself back at essentially its starting point for the week. Dovish market participants who see deteriorating US economic data (particularly inflation) find themselves at odds with the Federal Reserve, which seems bent on normalizing policy - no matter what.

Yet given the tone of Fed Chair Janet Yellen's press conference, it seems that the Fed is willingly looking through some of the data weakness in order to 'restock their crisis-fighting toolkit.' In a sense, the FOMC has become less data-dependent, insofar as the US economy doesn't roll over into a recession.

This divergence between FOMC signaling and market's perception may have inflated a small cushion underneath the US Dollar. As the Fed says it intends on hiking once more this year and then starting its balance sheet normalization process, rates markets (per Fed funds futures) are not pricing in another move for the rest of 2017.

The Fed has said it intends on hiking rates in an already tepid economic environment, which means if US economic data improves, rates markets will have to play a game of catch up - which would come as a benefit to the US Dollar. Although, if history serves as a guide, then the market is correct, meaning the Fed will have to back down from its hawkish puffery.

For now, traders are looking for evidence one way or the other to make a determination on where the Fed goes next. Today's calendar is scant, with a 'soft data' reading due in the form of the U. of Michigan Consumer Confidence report. Next week, attention will turn overseas, where in Brussels the Brexit negotiations will be getting started - although Fed speeches will garner extra attention in the wake of this week's events.

See the above video for technical considerations in EUR/USD, AUD/USD, GBP/USD, USD/JPY, NZD/USD, EUR/NZD, GBP/AUD, and the DXY Index.