USD Index faces extra consolidation around 104.00

The greenback appears offered just below the 104.00 support when tracked by the USD Index (DXY) on Thursday.

USD Index looks at data, risk trends

The index adds to Wednesday’s small decline and puts the 104.00 region to the test on the back of further improvement in the risk-associated universe ahead of the opening bell in the old continent.

In the meantime, bets for a pause at the Fed’s gathering in June seem to have lost momentum as of late, while a 25 bps rate hike in July seems the most likely scenario when gauged by FedWatch Tool measured by CME Group.

In the US data space, usual Initial Claims for the week ended on June 3 are due seconded by Wholesale Inventories for the month of April.

What to look for around USD

The index looks vulnerable around the 104.00 mark amidst the marked pick-up in the appetite for the risk complex.

In the meantime, bets of another 25 bps at the Fed’s next gathering in June reversed course in spite of the steady resilience of key US fundamentals (employment and prices, mainly), denting the recent rally in the dollar and favouring a further decline in US yields.

Bolstering a pause by the Fed instead appears to be the extra tightening of credit conditions in response to uncertainty surrounding the US banking sector.

Key events in the US this week: Initial Jobless Claims, Wholesale Inventories (Thursday).

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

USD Index relevant levels

Now, the index is losing 0.15% at 103.94 and the next support comes at 103.38 (monthly low June 2) seconded by 102.98 (100-day SMA) and finally 102.51 (55-day SMA). On the other hand, the breakout of 104.69 (monthly high May 31) would open the door to 105.48 (200-day SMA) and then 105.88 (2023 high March 8).