USD Index extends the rebound and flirts with 102.00

The greenback, when measured by the USD Index (DXY), maintains the bid tone for the second session in a row and trades closer to the 102.00 neighbourhood on Thursday.

USD Index looks at data, risk trends

The index advances further after bottoming out in the 100.40 region on Wednesday, helped at the same time by further loss of momentum in the risk-linked galaxy.

In the meantime, US yields remain well on the defensive and extend the leg lower to new multi-session lows across the curve against the backdrop of renewed recession concerns and speculation that the Fed might pause its hiking cycle as soo as at the May meeting.

Later in the session, usual weekly Claims will take centre stage along with the speech by St. Louis Fed J. Bullard (2025 voter, hawk).

What to look for around USD

Price action around the index appears reinvigorated as of late and now retargets the 102.00 region against the backdrop of increasing cautiousness among market participants ahead of the release of US Nonfarm Payrolls in the second half of the week.

Also weighing on the current bearish outlook for the dollar emerges the almost omnipresent view that the Federal Reserve could make an impasse in its current tightening bias in May, which has been propped up by persevering disinflation, nascent weakness in some key fundamentals and fresh concerns surrounding the banking sector

In addition, dwindling hawkishness from Fed rate setters also seems to have removed some strength from the greenback, particularly since the latest FOMC gathering and events around SVB and other medium-size US lenders.

Key events in the US this week: Initial Jobless Claims (Thursday) – Non-Farm Payrolls, Unemployment Rate, Consumer Credit Change (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 2024. Fed’s pivot. Geopolitical effervescence vs. Russia and China. US-China trade conflict.

USD Index relevant levels

Now, the index is advancing 0.07% at 101.95 and faces the next resistance level at 103.05 (monthly high April 3) seconded by 103.86 (100-day SMA) and then 105.11 (weekly high March 15). On the other hand, the breach of 101.43 (monthly low April 5) would open the door to 100.82 (2023 low February 2) and finally 100.00 (psychological level).