USD Index remains offered above 104.00 ahead of data, Fedspeak

The USD Index (DXY), which tracks the greenback vs. a bundle of its main competitors, remains on the defensive just above the 104.00 mark on Thursday.

USD Index looks at data, Fed speakers

The index retreats for the second session in a row amidst alternating risk appetite trends and as market participants continue to digest the release of the FOMC Minutes on Wednesday.

On the latter, FOMC members agreed on the need to push the monetary policy stance further into the restrictive stance and remain around that level for longer. In addition, the Committee kept the cautious note when it came to fears of inflation becoming entrenched, while members did not expect any reduction of the interest rates during this year.

In the money markets, yields advance marginally across the curve and ahead of the release of the ADP Employment Change for the month of December and the usual weekly Initial Claims, particularly after the FOMC Minutes highlighted the tightness of the labour market.

Further data releases will see the Balance of Trade figures for the month of November, the final December Services PMI and speeches by Atlanta Fed R.Bostic (2024 voter, hawk) and St. Louis Fed J.Bullard (2025 voter, hawk).

What to look for around USD

The dollar keeps the selling bias unchanged in the second half of the week so far, although it manages well to remain above the 104.00 barrier for the time being.

Meanwhile, the Fed’s pivot narrative has been pushed further forward following the publication of the FOMC Minutes on Wednesday, where the Committee advocated the need to remain within a restrictive stance for longer, at the time when it ruled out any interest rate reduction for the current year.

Furthermore, the tight labour market, still elevated inflation and the resilient economy are also seen supportive of the firm message from the Federal Reserve.

Key events in the US this week: ADP Employment Change, Initial Jobless Claims, Balance of Trade, Final S&P Global Services PMI (Thursday) – Nonfarm Payrolls, Unemployment Rate, ISM Non-Manufacturing PMI, Factory Orders (Friday).

Eminent issues on the back boiler: Hard/soft/softish? landing of the US economy. Prospects for further rate hikes by the Federal Reserve vs. speculation of a recession in the next months. Fed’s pivot. Geopolitical effervescence vs. Russia and China. US-China trade conflict.

USD Index relevant levels

Now, the index is retreating 0.03% at 104.22 and the breakdown of 103.39 (monthly low December 30) would open the door to 101.29 (monthly low May 30) and finally 100.00 (psychological level). On the upside, the next hurdle comes at 104.85 (weekly high January 3) seconded by 105.82 (weekly high December 7) and then 106.28 (200-day SMA).