Is it possible to create dynamic 2D animations

I’m looking to create a game where the main character is a blob similar to World of Goo or Mutant Blobs Attack. They player will drag their finger around the screen and the blob will follow them.

How can I create the fluid motion effect?

I highly recommend Jelly Mesh and Jelly Sprites. If you want a truly dynamic game go with 2D meshes rather than sprites, of course this also means a lot more work and thinking time (and gaming performance). Performance wise its probably smart to use both methods, mesh for the main characters (bosses and player and stuff) and sprites for the rest. At the moment I’m trying to do meshes for everything and its quite a nightmare to optimize.