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USD Index comes under pressure near 106.30 ahead of key data

  • The index fades part of the recent advance and revisits 106.30.
  • The ADP report and another revision of Q3 GDP come next.
  • Markets’ attention will also be on the speech by Chair Powell.

The USD Index (DXY), which tracks the Greenback vs.a bundle of its main competitors, comes under pressure and returns to the low-106.00s on Wednesday.

USD Index focuses on data, Powell

The index now faces some selling pressure and leaves behind three consecutive sessions with gains against the backdrop of the resumption of the appetite for the risk-associated universe.

The so far downtick in the US Dollar comes in line with the lack of traction in US yields across the curve, which keep unchanged the side-lined theme in place since mid-November.

The Greenback, in the meantime, is predicted to remain under scrutiny on Wednesday in light of key data releases due later in the NA session, as well as the speech by Federal Reserve Chairman Jerome Powell on “Economic Outlook, Inflation and the Labor Market”.

Indeed, the US calendar includes the usual MBA Mortgage Applications, the ADP Employment Change report, Goods Trade Balance, another estimate of the Q3 GDP Growth Rate, Pending Home Sales and the Fed’s Beige Book.

In addition, Federal Open Market Committee (FOMC) Governor L.Cook will speak on “The Outlook for Monetary Policy and Observations on the Evolving Economy”.

What to look for around USD

The US Dollar loses part of the recent shine and returns to the 106.30 zone amidst prevailing cautiousness ahead of results from key fundamentals and the speech by Fed’s Powell.

While hawkish Fedspeak maintains the Fed’s pivot narrative in the freezer, upcoming results in US fundamentals would likely play a key role in determining the chances of a slower pace of the Fed’s normalization process in the short term.

Key events in the US this week: Mortgage Applications, ADP Employment Change, GDP Growth Rate, Goods Trade Balance, Pending Home Sales, Fed Powell, Fed Beige Book (Wednesday) - PCE, Initial Jobless Claims, Personal Income/Spending, Final Manufacturing PMI, ISM Manufacturing, Construction Spending (Thursday) - Nonfarm Payrolls, Unemployment Rate (Friday).

Eminent issues on the back boiler: Hard/soft/softish? landing of the US economy. Prospects for further rate hikes by the Federal Reserve vs. speculation of a recession in the next months. Fed’s pivot. Geopolitical effervescence vs. Russia and China. US-China persistent trade conflict.

USD Index relevant levels

Now, the index is retreating 0.34% at 106.47 and the breakdown of 105.47 (200-day SMA) would open the door to 105.32 (weekly low November 28) and finally 104.63 (monthly low August 10). On the other hand, the immediate resistance emerges at 107.99 (weekly high November 21) followed by 109.11 (100-day SMA) and then 110.34 (55-day SMA).

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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