USD Index treads water around the 112.00 zone

The index alternates gains with losses at the beginning of the week.
The risk complex resumes the upside with GBP as outperformer.
ISM Manufacturing, Fedspeak next on tap in the NA session.

Pablo Piovano FXStreet

The greenback, in terms of the USD Index (DXY), starts the week on an inconclusive fashion around the 112.00 neighbourhood.

USD Index focuses on data, risk trends

The index lacks of clear direction and puts the 112.00 mark to the test on Monday following the continuation of the improvement in the risk-associated universe.

The downtick in the dollar comes pari passu with receding yields on both sides of the Atlantic, although still navigating within a consolidative mood in the upper end of the recent range.

In the US data space, the ISM Manufacturing will take centre stage seconded by Construction Spending and the final S&P Global Manufacturing PMI.

In addition, Atlanta Fed R.Bostic (2024 voter, hawk), Richmond Fed T.Barkin (2024 voter, centrist) and Kansas City Fed E.George (voter, hawk) are also due to speak later in the session.

What to look for around USD

The index starts the week under some mild pressure near the 112.00 zone.

Propping up the dollar’s underlying positive stance appears the firmer conviction of the Federal Reserve to keep hiking rates until inflation looks well under control regardless of a likely slowdown in the economic activity and some loss of momentum in the labour market.

Looking at the more macro scenario, the greenback also appears bolstered by the Fed’s divergence vs. most of its G10 peers in combination with bouts of geopolitical effervescence and occasional re-emergence of risk aversion.

Key events in the US this week: Final Manufacturing PMI, Construction Spending, ISM Manufacturing (Monday) – Factory Orders (Tuesday) – MBA Mortgage Applications, ADP Employment Change, Balance of Trade, Final Services PMI, ISM Non-Manufacturing (Wednesday) – Initial Jobless Claims (Thursday) – Nonfarm Payrolls, Unemployment Rate, Consumer Credit Change, Wholesale Inventories (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. Geopolitical effervescence vs. Russia and China. US-China persistent trade conflict.

USD Index relevant levels

Now, the index is up 0.01% at 112.18 and a breakout of 114.76 (2022 high September 28) would expose 115.00 (round level) and then 115.32 (May 2002 high). On the downside, the next contention aligns at 109.35 (weekly low September 20) seconded by 107.68 (monthly low September 13) and finally 107.58 (weekly low August 26).

Author

Pablo Piovano

FXStreet

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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