USD Index faces some pressure around 102.80 ahead of PCE

The index trades slightly on the defensive near 102.80.
US yields look to rebound from recent multi-week lows.
PCE, Core PCE take centre stage later in the NA session.

Pablo Piovano FXStreet

The greenback appears under some selling pressure and gyrates around the 102.80 region when measured by the USD Index (DXY) on Thursday.

USD Index focuses on key data

The index now faces some headwinds following Wednesday’s decent rebound from three-month lows near 102.40.

The ongoing three-week retracement in the dollar has been magnified in response to increasing speculation of interest rate cuts by the Federal Reserve at some point in the spring of 2024, a view that seems to still be contested by some Fed rate setters.

Later in the NA session, all the attention is expected to be on the release of US inflation figures tracked by the PCE and Core PCE, seconded by usual weekly Initial Claims, Personal Income, Personal Spending and Pending Home Sales.

What to look for around USD

The index managed to regain some balance after bottoming out in three-week lows near 102.40 earlier in the week.

Looking at the broader picture, the dollar appears depressed against the backdrop of rising speculation of probable interest rate cuts in H1 2024, all in response to further disinflationary pressures and the gradual cooling of the labour market.

Some support for the greenback, however, still emerges the resilience of the US economy as well as a persistent hawkish narrative from some Fed rate setters.

Key events in the US this week: PCE, Core PCE, Initial Jobless Claims, Personal Income, Personal Spending, Pending Home Sales (Thursday) – Final S&P Global Manufacturing PMI, ISM Manufacturing PMI, Construction Spending, Fed’s Powell (Friday).

Eminent issues on the back boiler: Growing perception of a soft landing for the US economy. Speculation of rate cuts at some point in the spring of 2024. Omnipresent geopolitical effervescence vs. Russia and China. Potential spread of the Middle East crisis to other regions.

USD Index relevant levels

Now, the index is down 0.09% at 102.74 and faces immediate contention at 102.46 (monthly low November 29) ahead of 101.74 (monthly low August 4) and then 100.51 (weekly low July 27). On the upside, the breakout of 103.58 (200-day SMA) would open the door to 104.21 (weekly high November 22) and then 105.47 (55-day SMA).

Author

Pablo Piovano

FXStreet

Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.

Markets move fast. We move first.

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

Editor's Picks

EUR/USD drops to daily lows near 1.1630

EUR/USD now loses some traction and slips back to the area of daily lows around 1.1630 on the back of a mild bounce in the US Dollar. Fresh US data, including the September PCE inflation numbers and the latest read on December consumer sentiment, didn’t really move the needle, so the pair is still on course to finish the week with a respectable gain.

GBP/USD trims gains, recedes toward 1.3320

GBP/USD is struggling to keep its daily advance, coming under fresh pressure and retreating to the 1.3320 zone following a mild bullish attempt in the Greenback. Even though US consumer sentiment surprised to the upside, the US Dollar isn’t getting much love, as traders are far more interested in what the Fed will say next week.

Gold makes a U-turn, back to $4,200

Gold is now losing the grip and receding to the key $4,200 region per troy ounce following some signs of life in the Greenback and a marked bounce in US Treasury yields across the board. The positive outlook for the precious metal, however, remains underpinned by steady bets for extra easing by the Fed.