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USD Index resumes the uptrend and regains 102.30

  • The index regains the smile and retest the 102.30 area.
  • Fed’s Bowman advocated for further tightening if needed.
  • US inflation figures will be the salient event this week.

The greenback, when gauged by the USD Index (DXY), leaves behind part of the recent weakness and reclaims the area around 102.30 as the risk-off mood seems to prevail early on Monday.

USD Index regains traction on Fed, risk-off

The index trades in an upbeat note on the back of renewed buying interest around the greenback at the beginning of the week.

In fact, the dollar picks up pace following comments from FOMC M. Bowman over the weekend, when she defended further tightening in case the recent progress in inflation falters. In this line, Bowman did not rule out another rate hike at the next gathering.

In the meantime, investors continue to digest Friday’s Nonfarm Payrolls figures (+187K), which showed that job creation seems to have cooled down during last month, although wage inflation held steady and the jobless rate ticked lower.

In the US data space, Consumer Credit Change will be the only release of note later in the NA session along with short-term bill auctions.

What to look for around USD

The index regains the area north of 102.00 on Monday, as market participants keep assessing the July NFP and cautiousness kicks in ahead of key US inflation figures due on August 10.

So far, the pronounced rally in DXY seems to have met a tough initial resistance near 102.80, while the dollar could face extra headwinds in response to the data-dependent stance from the Fed against the current backdrop of persistent disinflation and cooling of the labour market.

Furthermore, speculation that the July hike might have been the last of the current hiking cycle is also expected to keep the buck under some pressure for the time being.

Key events in the US this week: Consumer Credit Change (Monday) – Balance of Trade, Wholesale Inventories (Tuesday) – MBA Mortgage Applications (Wednesday) – Inflation Rate, Initial Jobless Claims (Thursday) – Producer Prices, Flash Michigan Consumer Sentiment (Friday).

Eminent issues on the back boiler: Persistent debate over a soft or hard landing for the US economy. Terminal Interest rate near the peak vs. speculation of rate cuts in late 2023 or early 2024. Geopolitical effervescence vs. Russia and China. US-China trade conflict.

USD Index relevant levels

Now, the index is gaining 0.24% at 102.25 and the breakout of 102.84 (weekly high August 3) would open the door to 103.52 (200-day SMA) and finally 103.57 (weekly high June 30). On the other hand, immediate contention emerges at 101.74 (monthly low August 4) seconded by 100.55 (weekly low July 27) and then 100.00 (psychological level).

Author

Pablo Piovano

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

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