USD Index looks slightly offered near 104.30, looks at Fedspeak

The greenback, in terms of the USD Index (DXY), navigates a narrow range around 104.30 at the end of the week.

USD Index keeps the range bound theme near 104.00

The index seems to have entered a consolidative phase near the 104.00 region following Tuesday’s steep decline to multi-week lows in the wake of the release of US inflation figures.

Furthermore, the lacklustre movement in the dollar coincides with a slight uptick in US yields across different time frames, amidst growing speculation that the Federal Reserve might initiate interest rate reductions in the first half of 2024.

On the US docket, the housing sector will take centre stage with the releases of Building Permits and Housing Starts.

Additionally, FOMC M. Barr (permanent voter, centrist), Boston Fed S. Collins (2025 voter, centrist), Chicago Fed A. Goolsbee (voter, centrist) and San Francisco Fed M. Daly (2024 voter, hawk) are all due to speak.

What to look for around USD

The pronounced decline in the index appears to have met some initial contention around the 104.00 region, or eleven-week lows, so far this week.

In the meantime, 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.

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

Key events in the US this week: Building Permits, Housing Starts (Friday).

Eminent issues on the back boiler: Persistent debate over a soft or hard landing for the US economy. Speculation of rate cuts in early 2024. 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 0.03% at 104.36 and faces immediate contention at 103.98 (monthly low November 14) ahead of 103.61 (200-day SMA) and 102.93 (weekly low August 30). On the upside, the breakout of 106.00 (weekly high November 10) could pave the way to a move to 106.88 (weekly high October 26) and finally 107.34 (2023 high October 3).