|

USD Index comes under pressure near 106.50, looks at Fedspeak

  • The index faces some selling pressure near 106.50.
  • US Monthly Budget Statement, Empire State index next on tap.
  • Fed’s P. Harker is due to speak later in the NA session.

The greenback, in terms of the USD Index (DXY), comes under some modest downside pressure following Friday’s weekly highs near the 106.80 level on Monday.

USD Index looks at risk trends, Fedspeak

The index gives away part of the recent two-day recovery to the vicinity of 106.80 on the back of a so far decent rebound in the risk-linked galaxy at the beginning of the week.

Despite the index reclaimed part of the ground lost since the beginning of the month during the latter part of last week, the dollar has been losing momentum in tandem with the renewed dovish tone from Fed speakers. In addition, despite the assumption that the Federal Reserve's tighter-for-longer policy remains in place for the time being, the possibility of another rate rise before the end of the year appears to have reduced recently.

Furthermore, escalating geopolitical concerns stemming from the Middle East and its associated pick-up in the risk aversion continue to be a source of potential strength for the dollar.

Later in the NA session, the NY Empire State Index is due seconded by Monthly Budget Statement and the speech by Philly Fed Patrick Harker (voter, hawk).

What to look for around USD

The price action around the index remains depressed and in the area of monthly lows around 105.70 ahead of the release of key data in the US calendar on Wednesday.

In the meantime, support for the dollar keeps coming from the good health of the US economy, which at the same time appears underpinned by the renewed tighter-for-longer stance narrative from the Federal Reserve.

Key events in the US this week: NY Empire State Manufacturing Index (Monday) - Retail Sales, Industrial Production, NAHB Index, Business Inventories (Tuesday) – MBA Mortgage Applications, Building Permits, Housing Starts, Fed Beige Book, TIC Flows (Wednesday) - Initial Jobless Claims, Philly Fed Manufacturing Index, CB Leading Index, Existing Home Sales, Fed Powell (Thursday).

Eminent issues on the back boiler: Persevering debate over a soft or hard landing for the US economy. Incipient speculation of rate cuts in early 2024. Geopolitical effervescence vs. Russia and China and the Middle East.

USD Index relevant levels

Now, the index is losing 0.20% at 106.46 and faces the next support at 105.53 (monthly low October 12) ahead of 104.42 (weekly low September 11) and then 103.22 (200-day SMA). On the other hand, a breakout of 106.78 (weekly peak October 13) could expose 107.34 (2023 high October 3) and finally 107.99 (weekly high November 21 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.

More from Pablo Piovano
Share:

Markets move fast. We move first.

Orange Juice Newsletter brings you expert driven insights - not headlines. Every day on your inbox.

By subscribing you agree to our Terms and conditions.

Editor's Picks

EUR/USD bounces toward 1.1750 as US Dollar loses strength

EUR/USD returned to the 1.1750 price zone in the American session on Friday, despite falling Wall Street, which indicates risk aversion. Trading conditions remain thin following the New Year holiday and ahead of the weekend, with the focus shifting to US employment and European data scheduled for next week.

GBP/USD nears 1.3500, holds within familiar levels

After testing 1.3400 on the last day of 2025, GBP/USD managed to stage a rebound. Nevertheless, the pair finds it difficult to gather momentum and trades with modest intraday gains at around 1.3490 as market participants remain in holiday mood.

Gold trims intraday gains, approaches $4,300

Gold retreated sharply from the $4,400  area and trades flat for the day in the $4,320 price zone. Choppy trading conditions exacerbated the intraday decline, although XAU/USD bearish case is out of the picture, considering growing expectations for a dovish Fed and persistent geopolitical tensions.

Cardano gains early New Year momentum, bulls target falling wedge breakout

Cardano kicks off the New Year on a positive note and is extending gains, trading above $0.36 at the time of writing on Friday. Improving on-chain and derivatives data point to growing bullish interest, while the technical outlook keeps an upside breakout in focus.

Economic outlook 2026-2027 in advanced countries: Solidity test

After a year marked by global economic resilience and ending on a note of optimism, 2026 looks promising and could be a year of solid economic performance. In our baseline scenario, we expect most of the supportive factors at work in 2025 to continue to play a role in 2026.

Crypto market outlook for 2026

Year 2025 was volatile, as crypto often is.  Among positive catalysts were favourable regulatory changes in the U.S., rise of Digital Asset Treasuries (DAT), adoption of AI and tokenization of Real-World-Assets (RWA).