USD Index looks for direction just above 103.00

The greenback, when measured by the USD Index (DXY), attempts to extend the rebound seen in the second half of last week just above the 103.00 mark.

USD Index: Gains look capped around 103.40

After bottoming out in the area just below the 102.00 yardstick on March 23, the index managed to regain some composure and reclaim the are beyond 103.00 the figure in past sessions, although the bull run appears to have met initial resistance near 103.40, an area coincident with the 55-day SMA.

Moving forward, investors are expected to closely follow messages from Fed’s rate setters in the wake of the recent dovish hike, while inflation figures tracked by the PCE should take centre stage towards the end of the week.

Later on Monday, short-term bill auctions and the speech by FOMC’s P.Jefferson (permanent voter, centrist) are due.

What to look for around USD

The index appears slightly bid in the area above the 103.00 mark at the beginning of the week, amidst unclear direction in US yields and alternating risk appetite trends.

So far, speculation of a potential Fed’s pivot in the short-term horizon should keep weighing on the dollar, although the still elevated inflation, the resilience of the US economy and the hawkish narrative from Fed speakers are all seen playing against that view for the time being.

Key events in the US this week: Advanced Goods Trade Balance, FHFA House Price Index, CB Consumer Confidence Advanced (Tuesday) – MBA Mortgage Applications, Pending Home Sales (Wednesday) – Final Q4 GDP Growth Rate, Initial Jobless Claims (Thursday) – PCE, Personal Income/Spending, Final Michigan Consumer Sentiment (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 0.08% at 103.20 and faces the next hurdle at 103.39 (55-day SMA) followed by 104.30 (100-day SMA) and then 105.88 (2023 high March 8). On the other hand, the breach of 101.93 (monthly low March 23) would open the door to 100.82 (2023 low February 2) and finally 100.00 (psychological level).