USD Index recedes from 2023 tops near 106.80

The greenback now faces some selling pressure and recedes to the 106.60 region when tracked by the USD Index (DXY) during the European morning on Thursday.

USD Index looks at data, yields

The index now gives away part of the recent four-session advance, including Wednesday’s move to new YTD peaks in the 106.80/85 band, and revisits the 106.60 area on the back of some mild recovery in the appetite for the risk complex.

In the meantime, the rally in the greenback remains well supported by the persistent sell-off in the US bonds markets, which in turn propelled yields to multi-year tops in response to investors’ perception that the Federal Reserve would surely maintain its restrictive stance for a longer period.

In the US data space, the final figures of Q2 GDP will take centre stage seconded by usual weekly Initial Claims, Pending Home Sales and speeches by Austan Goolsbee (Chicago), Lisa Cook (FOMC Governor). In addition, Chief Jerome Powell will participate in an event with educators in Washington DC.

What to look for around USD

Despite the ongoing knee-jerk, the index remains well supported by both investors’ sentiment and higher yields, which have pushed the dollar to new yearly peaks around the 106.80 on Wednesday.

In the meantime, support for the dollar keeps coming from the good health of the US economy, which at the same time appears underpinned by the renewed tighter-for-longer stance narrative from the Federal Reserve.

Key events in the US this week: Initial Jobless Claims, Pending Home Sales, Final Q2 GDP Growth Rate, Fed Powell (Thursday) – PCE, Core PCE, Personal Income, Personal Spending, Advanced Goods Trade Balance, Final Michigan Consumer Sentiment (Friday).

Eminent issues on the back boiler: Persevering 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 losing 0.10% at 106.55 and faces initial support at 104.42 (weekly low September 11) ahead of 103.08 (200-day SMA) and then 102.93 (weekly low August 30). On the other hand, a breakout of 106.83 (2023 high September 27) would open the door to 107.19 (weekly high November 30, 2022) and finally 107.99 (weekly high November 21 2022).