US Dollar Index comes under pressure near 103.00 ahead of PCE

DXY faces some selling sentiment and retests the 103.00 area.
US yields trade in an inconclusive fashion near recent peaks.
US Inflation PCE will take centre stage later in the NA session.

Pablo Piovano FXStreet

The greenback, in terms of the US Dollar Index (DXY), faces a corrective downside and comes all the way down to revisit the 103.00 neighbourhood at the end of the week.

US Dollar Index now looks to PCE

The index trades on the defensive after six consecutive daily advances and returns to the vicinity of 103.00 after hitting fresh cycle tops just pips away from the 104.00 hurdle on Thursday.

From the US cash markets, yields trade without a clear direction so far, although they manage to keep business in the upper end of the recent range on Friday.

In the meantime, the dollar remains well underpinned by speculations of a tighter normalization of the Fed’s monetary conditions, which is expected to kick in with a 50 bps rate hike at the May 4 event.

Later in the NA session, inflation figures tracked by the PCE (the Fed’s preferred gauge) will be the salient event seconded by Personal Income/Spending and the final Consumer Sentiment for the month of April.

What to look for around USD

The dollar faces some correction following Thursday’s 19-year highs near the 104.00 barrier. The Fed’s more aggressive rate path continues to be the main driver behind the robust bullish stance in the dollar, which also appears reinforced by the current elevated inflation narrative and the solid health of the labour market. Collaborating with the latter appear bouts of geopolitical tensions as well as the move higher in US yields.

Key events in the US this week: Core PCE, PCE, Final Consumer Sentiment, Personal Income/Spending (Friday).

Eminent issues on the back boiler: Escalating geopolitical effervescence vs. Russia and China. Fed’s rate path this year. US-China trade conflict. Future of Biden’s Build Back Better plan.

US Dollar Index relevant levels

Now, the index is retreating 0.68% at 102.98 and faces the next support at 99.81 (weekly low April 21) seconded by 99.57 (weekly low April 14) and then 97.68 (weekly low March 30). On the upside, the breakout of 103.92 (2022 high April 28) would open the door to 104.00 (round level) and finally 105.63 (high December 11 2002).

Author

Pablo Piovano

FXStreet

Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.

GBP/USD surges to multi-day peaks past 1.3250

GBP/USD leaves behind Friday’s small pullback and advances past 1.3250 level, or five-day highs, on Monday. Cable’s upside follows extra losses in the Greenback, while traders continue to assess the geopolitical front and upcoming key events.

EUR/USD picks up extra pace north of 1.1400

EUR/USD extends its recovery past 1.1400 the figure as the NA session draws to a close on Monday. Indeed, the pair advances for the third straight day amid the persistent offered bias in the US Dollar. Meanwhile, market participants keep gearing up for the ECB Forum in Sintra and the release of critical US labour market data.

Gold struggles to attract investors

Gold remains under marked selling pressure, holding on just above the key $4,000 mark per troy ounce at the beginning of the week. The precious metal reverses two daily advances in a row as renewed effervescence in the Middle East revive inflation concerns and bolster Fed rate hike expectations.

Strategy unveils plan allowing Bitcoin sales to fund stock buybacks, dividends and reserves

Strategy (MSTR) has unveiled a Digital Credit Framework to strengthen the company’s financial standing. Under the new framework, the world’s largest corporate holder of Bitcoin (BTC) will pivot from its previous accumulation strategy, opting to sell BTC in order to boost liquidity, fund dividend payments, execute stock buybacks, and strengthen cash reserves.

Just like Fed, is BoJ’s independence under threat?

When talking about central bank independence, most of the focus has been on Donald Trump’s pressure on the Federal Reserve. But a similar story, a quieter one for now, seems to be happening on the other side of the Pacific: Japan’s government may be testing the Bank of Japan’s independence.

Kevin Warsh isn't expected to say much in Sintra: That's exactly why markets will listen

Financial markets could find an important catalyst in the enchanting, fairytale-like landscape of Sintra this week. The ECB Forum will, as it does every year, gather the crème de la crème of central banks. The new boss at the Fed, who has clearly said that the Fed should stop explaining everything, will need to talk – and traders should listen.