USD Index comes under pressure below 103.00

On Monday, the USD Index (DXY), which monitors the performance of the greenback against a basket of its primary rival currencies, began the week on a weaker note, retreating from the previous week's highs beyond the 103.00 level.

USD Index looks to risk trends, ECB

As a result of some decent recovery in the risk-linked market, the index is currently experiencing some selling pressure, causing it to retreat to the 102.70 level, while market participants take profits after the two-day strong rebound at the start of the week.

Investors are still predicting a 25 bps rate hike by the Federal Reserve at the July 26 event, while the US money market show some consolidation in yields across the curve following recent peaks.

On another front, speculative net longs in the USD climbed to levels last seen in late January in the week ended on June 20 as per the latest CFTC Positioning Report, as investors were digesting the FOMC gathering on June 14.

The NA session will only see one release, the Dallas Fed Manufacturing Index for June, while the ECB Forum in Sintra, Portugal, will also attract attention in the first half of the week.

What to look for around USD

The index gives away part of the recent gains and slips back below the key 103.00 region at the beginning of the week.

Meanwhile, the likelihood of another 25 bps hike at the Fed's upcoming meeting in July remains high, supported by the continued strength of key US fundamentals such as employment and prices.

This view was further bolstered by comments from Fed Chief Powell at the June FOMC event, who referred to the July meeting as "live" and indicated that most of the Committee is prepared to resume the tightening campaign as early as next month.

Key events in the US this week: Durable Goods Orders, FHFA House Price Index, CB Consumer Confidence, New Home Sales (Tuesday) – MBA Mortgage Applications, Advanced Goods Trade Balance, Fed Powell (Wednesday) – Final Q1 Growth Rate, Initial Jobless Claims (Thursday) – PCE, Core PCE, 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 losing 0.15% at 102.71 and faces the next contention at 101.92 (monthly low June 16) followed by 100.78 (2023 low April 14) and finally 100.00 (round level). On the other hand, the breakout of 103.16 (weekly high June 23) would open the door to 104.69 (monthly high May 31) and then 105.07 (200-day SMA).