USD Index comes under pressure near 101.40, looks at data, Fed

The greenback, in terms of the USD Index (DXY), faces some selling pressure after hitting new multi-session peaks in the 101.40/45 band on turnaround Tuesday.

USD Index focused on data, FOMC event

The index now surrenders part of its recent 5-day advance to the 101.40 region on the back of some improvement in the sentiment surrounding the risk complex as well as steady cautiousness prior to the FOMC event on Wednesday.

So far, while a 25 bps rate hike by the Federal Reserve is largely priced in, market participants are expected to closely follow any hint from the Committee regarding the potential next steps amidst growing speculation that the hiking campaign could be nearing its end.

In the US fixed income space, yields trade on the defensive in the short end and the belly of the curve vs. small gains in the long end.

In the meantime, the Conference Board will publish its Consumer Confidence gauge for the month of July, seconded by the release of the FHFA’s House Price Index.

What to look for around USD

The rally in the index seems to have met an initial hurdle around 101.40 amidst rising expectation ahead of the FOMC interest rate decision on Wednesday.

In the near term, there are no changes to the perception that the Fed would resume its tightening process later in the month despite persistent disinflationary pressures and the still tight labour market.

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: FHFA House Price Index, CB Consumer Confidence (Tuesday) – MBA Mortgage Applications, New Home Sales, Fed Interest Rate Decision (Wednesday) – Durable Goods Orders, Advanced Q2 GDP Growth Rate, Initial Jobless Claims, Flash Goods Trade Balance, Pending Home Sales (Thursday) – PCE, Core PCE, Personal Income, Personal 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. Geopolitical effervescence vs. Russia and China. US-China trade conflict.

USD Index relevant levels

Now, the index is down 0.10% at 101.28 and faces immediate contention at 100.0 (psychological level) prior to 99.57 (2023 low July 13) and then 97.68 (weekly low March 30). On the flip side, the breakout of 101.42 (weekly high July 25) would open the door to 102.61 (55-dat SMA) snf finally 103.54 (weekly high June 30.