USD Index struggles for direction near 103.00, looks at data, Fedspeak

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• The index approaches the key 103.00 support.
• US yields look poised to extend the decline.
• Consumer Confidence, Fedspeak come next in the docket.

The greenback alternates gains with losses near the 103.00 neighbourhood when gauged by the USD Index (DXY) on turnaround Tuesday.

USD Index focuses on key data, Fed speakers

The index remains under pressure and keeps the offered stance well in place, navigating at the same time its third consecutive week of losses and its worth month since November 2022 so far.

In the meantime, the perception that the Federal Reserve might start reducing its interest rates at some point in the spring of 2024 remains well on the rise despite the consensus around this view is still elusive among Fed rate setters.

Back on the US docket, the always relevant Consumer Confidence tracked by the Conference Board will be the salient event seconded by the FHFA’s House Price Index.

In addition, Chicago Fed A. Goolsbee (voter, centrist), FOMC C. Waller (permanent voter, hawk), FOMC M. Bowman (permanent voter, centrist) and FOMC M. Barr (permanent voter, centrist) are all due to speak.

What to look for around USD

The index extends the leg lower and flirts with the key contention zone near 103.00 on Tuesday.

Looking at the broader picture, the dollar appears depressed against the backdrop of rising speculation of probable interest rate cuts in H1 2024, all in response to further disinflationary pressures and the gradual cooling of the labour market.

Some support for the greenback, however, still emerges the resilience of the US economy as well as a persistent hawkish narrative from some Fed rate setters.

Key events in the US this week: FHFA’s House Price Index, CB Consumer Confidence (Tuesday) – MBA Mortgage Applications, Q3 GDP Growth Rate, Goods Trade Balance, Fed Beige Book (Wednesday) – PCE, Core PCE, Initial Jobless Claims, Personal Income, Personal Spending, Pending Home Sales (Thursday) – Final S&P Global Manufacturing PMI, ISM Manufacturing PMI, Construction Spending, Fed’s Powell (Friday).

Eminent issues on the back boiler: Growing perception of a soft landing for the US economy. Speculation of rate cuts at some point in the spring of 2024. Omnipresent geopolitical effervescence vs. Russia and China. Potential spread of the Middle East crisis to other regions.

USD Index relevant levels

Now, the index is down 0.02% at 103.17 and faces immediate contention at 103.07 (monthly low November 28) ahead of 102.93 (weekly low August 30) and then the psychological 100.00 threshold. On the upside, the breakout of 104.21 (weekly high November 22) could expose a move to 106.00 (weekly high November 10) and finally 106.88 (weekly high October 26).