US Dollar Index pokes weekly top near 104.50 ahead of Fed Powell’s ECB Forum appearance

• DXY struggles to extend the biggest daily gains in over a week during sluggish session.
• Market sentiment remains mixed amid recession/inflation fears, yields extend pullback from weekly high.
• US Core PCE details for Q1 2022, final GDP will precede the key central bankers’ discussions at the ECB Forum.

US Dollar Index (DXY) seesaws around 104.50, after rising the most in eight days to refresh the weekly top the previous day. That said, the greenback gauge awaits key data/events as bulls take a breather during Wednesday’s sluggish Asian session.

The return of hawkish Fed bets appears to have renewed the US dollar buying the previous day. The US data, as well as geopolitical and trade chatters, seemed to have underpinned the bullish hopes from the greenback. It’s worth noting that the escalating fears of a recession are an extra burden on the market sentiment and underpin the USD’s safe-haven demand.

A jump in the one-year US consumer inflation expectations joined hawkish Fedspeak to renew the fears of faster Fed rate hikes. That said, the US Conference Board (CB) Consumer Confidence Index dropped for the second consecutive month in June, to 98.7 versus 100.0 expected and 103.2 in May. In doing so, the widely followed consumer sentiment gauge dropped to the lowest level since February 2021. Further details revealed that the one-year consumer inflation rate expectations climbed to 8% from May's revised print of 7.5. It should be noted that the US trade deficit dropped to the lowest in a year, to $104.3 billion, per the latest release for May.

Elsewhere, the Group of Seven (G7) nations announced restrictions on Russian oil prices while the North Atlantic Treaty Organization (NATO) meeting signals not a welcome environment for China. Furthermore, US Deputy Commerce Secretary Don Graves said, “A clear US response on China tariffs is coming soon,” per Bloomberg TV, which in turn raises fears of the fresh Sino-American tussles.

That said, the US 10-year Treasury yields snapped a two-day uptrend whereas Wall Street closed in the red. The S&P 500 Futures, however, print mild losses by the press time.

Moving on, the US Core Personal Consumption Expenditure (PCE) for Q1 2022, expected to remain unchanged at 5.1%, will be important. On the same line will be the final readings of the US Q1 GDP, which is likely to confirm a 1.5% Annualized contraction. Above all, the central bankers’ discussions at the ECB Forum will be the key for the market players to watch for clear directions.

Technical analysis

A clear upside break of the two-week-old resistance line, now support around 104.00, directs US Dollar Index towards the previous weekly top near 105.00 before highlighting the multi-month peak marked earlier in June, around 105.80.