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USD Index breaches 102.00 and drops to 7-month lows

  • The index extends the bearish move below the 102.00 mark.
  • Markets continue to adjust to the Fed’s dovish hike.
  • Weekly Claims, New Home Sales, takes centre stage later on Thursday.

The greenback, in terms of the USD Index (DXY), remains well on the defensive and breaks below the 102.00 yardstick for the first time since early February.

USD Index weaker post-FOMC

The last time the index retreated for six consecutive sessions was in mid-October 2021.

The dovish hike by the Federal Reserve on Wednesday in combination with the equally disheartening message from Chief Powell at his press conference lent further legs to the downtrend in the buck and dragged the index to new multi-week lows.

The lack of traction in US yields across the curve, in the meantime, accompanies the marked move lower in the index for the time being.

In the US data space, usually weekly Initial Claims, New Home Sales and the Chicago Fed National Activity Index will be in the limelight later in the NA session.

What to look for around USD

The index remains well under pressure and slips back to multi-week lows in the sub-102.00 region, as investors continue to digest the latest Fed’s gathering.

In the meantime, diminishing banking jitters continues to lend support to the risk complex and keeps the price action around the buck well depressed for the time being.

So far, speculation on a potential Fed’s pivot in the short-term horizon should weigh on the dollar, although the still elevated inflation, the resilience of the US economy and the hawkish narrative from Fed speakers is seen playing against that view.

Key events in the US this week: Initial Jobless Claims, Chicago Fed National Activity Index, New Home Sales (Thursday) – Durable Goods Orders, Advanced PMIs (Friday).

Eminent issues on the back boiler: Rising conviction of a soft landing of the US economy. Persistent narrative for a Fed’s tighter-for-longer stance. Terminal rates near 5.5%? Fed’s pivot. Geopolitical effervescence vs. Russia and China. US-China trade conflict.

USD Index relevant levels

Now, the index is retreating 0.44% at 102.07 and the breach of 101.93 (monthly low March 23) would open the door to 100.82 (2023 low February 2) and finally 100.00 (psychological level). On the other hand, the next resistance emerges at 105.88 (2023 high March 8) seconded by 106.60 (200-day SMA) and then 107.19 (weekly high November 30 2022).

Author

Pablo Piovano

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

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