USD Index extends the weekly upside to 103.80 ahead of key data

The index adds to Monday’s gains and revisits 103.80.
US yields trade on the defensive so far on Tuesday.
The US services sector will be in the limelight later in the session.

Pablo Piovano FXStreet

The USD Index (DXY), which tracks the greenback vs. a bundle of its main competitors, maintains the optimism seen at the beginning of the week and advances to 103.80 on turnaround Tuesday.

USD Index focuses on key data

The index regains extra buying interest and builds on Monday’s gains in the upper end of the range near 103.80 so far on Tuesday.

Meanwhile, speculation continues apace regarding the prospects of interest rate decreases by the Federal Reserve at some point in the spring of 2024, despite differing perspectives on this issue among Fed policymakers.

In the US calendar, final S&P Global Services PMI is due ahead of the more important ISM Services PMI and the RCM/TIPP Economic Optimism Index.

What to look for around USD

The index regains poise and gradually approaches the key 104.00 region amidst the persistent weakness in the risk complex.

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: Final S&P Global Services PMI, ISM Services PMI, RCM/TIPP Economic Optimism Index (Tuesday) – MBA Mortgage Applications, ADP Employment Change, Balance of Trade (Wednesday) – PCE, Core PCE, Initial Jobless Claims, Wholesale Inventories, Consumer Credit Change (Thursday) – Nonfarm Payrolls, Unemployment Rate, Flash Michigan Consumer Sentiment (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 up 0.07% at 103.70 and the breakout of 104.21 (weekly high November 22) would open the door to 105.39 (55-day SMA) and finally 106.00 (weekly peak November 10). On the flip side, immediate contention comes at 102.46 (monthly low November 29) ahead of 101.74 (monthly low August 4) and then 100.51 (weekly low July 27).

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.

EUR/USD tests 1.1800 barrier above 50-day EMA

EUR/USD gains ground after three days of losses, trading around 1.1790 during the Asian hours on Thursday. The 14-day Relative Strength Index momentum indicator at 47 (neutral) reflects easing momentum. The RSI below 50 keeps momentum balanced and could limit follow-through.

GBP/USD struggles near four-week low vs. USD, below 1.3500 amid BoE rate cut bets

The GBP/USD pair is seen consolidating its weekly losses registered over the past three days and oscillating in a narrow range near a four-week trough, touched during the Asians session on Thursday. Spot prices currently trade just below the 1.3500 psychological mark and seem vulnerable to slide further.

Gold consolidates below $5,000 amid geopolitical risk, hawkish FOMC Minutes

Gold extends its sideways consolidative price move through the Asian session on Thursday and remains below the $5,000 psychological mark as traders seem hesitant amid mixed cues. The US Dollar preserves its strong gains to over a one-week high in the wake of somewhat hawkish Minutes of the US Federal Reserve’s January monetary policy meeting.

Injective token surges over 13% following the approval of the mainnet upgrade proposal

Injective price rallies over 13% on Thursday after the network confirmed the approval of its IIP-619 proposal. The green light for the mainnet upgrade has boosted traders’ sentiment, as the upgrade aims to scale Injective’s real-time Ethereum Virtual Machine architecture and enhance its capabilities to support next-generation payments. The technical outlook suggests further gains if INJ breaks above key resistance.

Mixed UK inflation data no gamechanger for the Bank of England

Food inflation plunged in January, but service sector price pressure is proving stickier. We continue to expect Bank of England rate cuts in March and June. The latest UK inflation read is a mixed bag for the Bank of England, but we doubt it drastically changes the odds of a March rate cut.