USD Index climbs to fresh tops past the 104.00 mark ahead of data

• The index advances to multi-week highs north of 104.00.
• Concerns around the debt ceiling remain on the rise.
• Flash Q! GDP, weekly Claims, housing data take centre stage later.

The greenback, in terms of the USD Index (DXY), extends the upside beyond the 104.00 hurdle for the first time since mid-March.

USD Index looks at debt ceiling, data

The index advances for the fourth session in a row and keeps the positive streak for the third consecutive week on the back of rising concerns over the US debt ceiling issue.

On this, House Speaker McCarthy showed some optimism that a deal could be reached before June, although ratings agency Fitch placed the country’s AAA credit rating on watch late on Wednesday, magnifying fears at the same time.

In the US data space, usual weekly Initial Claims are due seconded by another revision of the Q1 GDP Growth Rate, Pending Home Sales and the Chicago Fed National Activity Index.

What to look for around USD

The index keeps the relentless march north unabated and surpasses the 104.00 hurdle on Thursday, or new multi-week peaks.

In the meantime, diminishing bets that the Fed will probably pause its normalization process in June appear underpinned by the steady resilience of key US fundamentals (employment and prices mainly) amidst the ongoing rally in US yields and the DXY.

Favouring a pause by the Fed, instead, appears the extra tightening of credit conditions in response to uncertainty surrounding the US banking sector.

Key events in the US this week: Initial Jobless Claims, Chicago Fed National Activity Index, Pending Home Sales, Advanced Q1 GDP Growth Rate (Thursday) – PCE/Core PCE, Durable Goods Orders, Flash Goods Trade Balance, Personal Income/Spending, Final Michigan Consumer Sentiment (Friday).

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 late 2023/early 2024. Fed’s pivot. Geopolitical effervescence vs. Russia and China. US-China trade conflict.

USD Index relevant levels

Now, the index is up 0.17% at 104.05 and a break above 105.00 (round level) could open the door to 105.71 (200-day SMA) and then 105.88 (2023 high March 8). On the other hand, the next support emerges at the 100-day SMA at 102.85 seconded by the 55-day SMA at 102.44 and finally 101.01 (weekly low April 26).