USD Index treads water around 104.00 ahead of data

The greenback alternates gains with losses around the 104.00 yardstick when measured by the USD Index (DXY) on turnaround Tuesday.

USD Index focused on data, Fed

The index so far trades in an inconclusive fashion near the 104.00 threshold, coming under some moderated selling pressure following last Friday’s multi-week tops near 104.50.

The current loss of momentum in the dollar comes along further weakness in US yields across the curve, as investors continue to price in a Fed’s pause in September vs. a 25 bps rate hike at the November meeting.

Data-wise in the US calendar, Consumer Confidence gauged by the Conference Board will take centre stage along with JOLTs Job Openings and the FHFA House Price Index.

What to look for around USD

Renewed weakness now prompts the index to challenge the key support at 104.00 the figure amidst an improved sentiment in the risk-linked universe.

In the meantime, support for the dollar keeps coming from the good health of the US economy, which seems to have reignited the narrative around the tighter-for-longer stance from the Federal Reserve.

Furthermore, the idea that the dollar could face headwinds in response to the data-dependent stance from the Fed against the current backdrop of persistent disinflation and cooling of the labour market appears to be losing traction as of late.

Key events in the US this week: FHFA House Price Index, JOLTs Job Openings, CB Consumer Confidence (Tuesday) – MBA Mortgage Applications, ADP Employment Change, Flash Q2 Growth Rate, Advanced Goods Trade Balance, Pending Home Sales (Wednesday) – PCE, Core PCE, Personal Income, Personal Spending, Chicago PMI, Initial Jobless Claims (Thursday) – Nonfarm Payrolls, Unemployment Rate, Final Manufacturing PMI, ISM Manufacturing PMI, Construction Spending (Friday).

Eminent issues on the back boiler: Persistent debate over a soft or hard landing for the US economy. Incipient speculation of rate cuts in early 2024. Geopolitical effervescence vs. Russia and China.

USD Index relevant levels

Now, the index is down 0.06% at 103.91 and faces immediate support at 103.09 (200-day SMA) followed by 102.33 (55-day SMA) and then 101.74 (monthly low August 4). On the upside, the breakout of 104.44 (monthly high August 25) would open the door to 104.69 (monthly high May 31) and finally 105.88 (2023 high March 8).