- The index comes under pressure following recent tops.
- The mild recovery in the risk complex weighs on the Dollar.
- Industrial Production, flash Consumer Sentiment next on tap in the US docket.
The USD Index (DXY), which tracks the greenback vs. a bundle of its main competitors, trades slightly on the defensive around the 105.30 region at the end of the week.
USD Index appears offered ahead of data
The index sheds some ground after three consecutive daily advances on Friday, all following Thursday’s multi-month peaks in the 105.40/45 band.
The tepid improvement in the appetite for the risk-associated galaxy weighs on the greenback in the wake of the opening bell in the old continent, as market participants continue to digest the latest ECB gathering and US yields look poised to extend Thursday’s advance for the time being.
In the meantime, bets for a 25 bps rate hike by the Federal Reserve at its November 1 event keep losing ground vs. increasing speculation of interest rate cuts to start in the second quarter of the next year.
In the domestic calendar, Export/Import Prices are due seconded by Industrial/Manufacturing Production, Capacity Utilization and the advanced prints for the Consumer Sentiment for the current month.
What to look for around USD
Despite the so far knee-jerk, the upside bias in the index appears intact and with rising chances of another visit to the 2023 peak near 105.90 (March 8).
In the meantime, support for the dollar keeps coming from the good health of the US economy, despite the narrative around the tighter-for-longer stance from the Federal Reserve now looks somewhat diminished amidst the current backdrop of persistent disinflation and cooling of the labour market.
Key events in the US this week: Industrial Production, Advanced Michigan Consumer Sentiment (Friday).
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.
USD Index relevant levels
Now, the index is down 0.09% at 105.25 and the breach of 104.42 (weekly low September 11) would open the door to 103.02 (200-day SMA) and then 102.93 (weekly low August 30). On the other hand, the next up barrier align at 105.43 (monthly high September 14) ahead of 105.88 (2023 high March 8) and finally 106.00 (round level).
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