- The index extends the consolidative theme around the 102.00 region.
- Risk appetite trends looks mixed so far at the end of the week.
- Housing data, Fedspeak next on tap in the US docket.
The USD Index (DXY), which tracks the greenback vs. a bundle of its main rivals, extends further the consolidation theme on Friday, always around the 102.00 neighbourhood.
USD Index appear capped by 103.00
The index exchanges gains with losses around the 102.00 region on Friday, always within the multi-session range bound theme and amidst the inconclusive risk appetite trends.
In the meantime, the Fed’s tighter-for-longer narrative was reinforced once again by recent comments from Fed rate setters against the backdrop of some incipient weakness in some US fundamentals and the unabated resilience of the labour market.
In the US money markets, yields so far extend the tepid bounce following multi-week lows recorded earlier in the week.
In the US data space, Existing Home Sales for the month of December will be the only release later in the day seconded by speeches by Philly Fed P.Harker (voter, hawk) and FOMC C.Waller (permanent voter, centrist).
What to look for around USD
The dollar remains side-lined in the lower end of the recent range near the 102.00 mark at the end of the week.
The idea of a probable pivot in the Fed’s policy continues to weigh on the greenback and keeps the price action around the DXY depressed. This view, however, also comes in contrast to the hawkish message from the latest FOMC Minutes and recent comments from fed’s rate-setters, all pointing to the need to advance to a more restrictive stance and stay there for longer, at the time when rates are seen climbing above the 5.0% mark.
On the latter, the tight labour market and the resilience of the economy are also seen supportive of the firm message from the Federal Reserve and the continuation of its hiking cycle.
Key events in the US this week: Existing Home Sales (Friday).
Eminent issues on the back boiler: Rising conviction of a soft landing of the US economy. Prospects for extra 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 gains 0.10% at 102.15 and faces the next up barrier at the weekly high at 102.89 (January 18) followed by 105.63 (monthly high January 6) and then 106.44 (200-day SMA). On the flip side, the breakdown of 101.77 (monthly low January 16) would open the door to 101.29 (monthly low May 30) and finally 100.00 (psychological level).
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