USD Index Comes Under Pressure And Challenges 102.00

Regarding the USD Index (DXY), the greenback gives away part of the recent recovery and puts the 102.00 region to the test on Tuesday.

USD Index Looks At Fed Data

The index shows some weakness and leaves behind three consecutive daily advances amidst the moderated rebound in the risk-associated universe and declining US yields on Tuesday.

On the latter, yields retreat across the curve and set aside a promising start of the week amidst the start of the 2-day FOMC event later in the day.

On this, the Federal Reserve is broadly expected to hike rates by 25 bps on Wednesday, while investors’ attention is expected to closely follow any hints of the potential moves from the Fed regarding rates in the future, particularly amidst the (increasing) likelihood of a probable pause in its hiking cycle.

Later in the US data space, Factory Orders for March and JOLTs Job Openings will take center stage in the docket.

What To Look For Around USD

The dollar seems to have met some decent resistance in the low-102.00s.

Looking at the broader picture, the index continues to navigate in a consolidative phase against steady expectations of another rate increase in May by the Fed and rising cautiousness in light of the potential next decisions by the Fed in the next months.

In favor of a pivot in the Fed’s hiking cycle following the May event, appears the persevering disinflation and nascent weakness in some key fundamentals.

Key events in the US this week: Factory Orders (Tuesday) – MBA Mortgage Applications, ADP Employment Change, Final Services PMI, ISM Services PMI, FOMC Meeting, Powell press conference (Wednesday) – Balance of Trade, Initial Jobless Claims (Thursday) – NonfarmPayrolls, Unemployment Rate, Consumer Credit Change.

Eminent issues on the back boiler: Persistent debate over a soft/hard landing of the US economy. Terminal Interest rate near the peak vs. speculation of rate cuts in 2024. Fed’s pivot. Geopolitical effervescence vs. Russia and China. US-China trade conflict.

USD Index relevant levels

Now, the index is losing 0.18% at 101.93 and faces immediate support at 100.78 (2023 low April 14) ahead of 100.00 (psychological level) and finally 99.81 (weekly low April 21, 2022). On the other hand, a break above 102.80 (weekly high April 10) would open the door to 103.05 (monthly high April 3) and then 103.15 (100-day SMA).

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