USD Index remains consolidative in the low-103.00s ahead of data, Fedspeak

• The index regains some poise following Thursday’s strong sell-off.
• Further consolidation appears likely below the 104.00 region.
• The Flash Consumer Sentiment, Fed’s Waller, Harker come later.

The USD Index (DXY), which tracks the greenback vs. a bundle of its main rival currencies, navigates with humble gains in the 103.30 region ahead of the opening bell in the old continent on Friday.

USD Index bounces off 102.60

Following the strong knee-jerk to the 102.60 zone during the previous session, the index regains some balance and revisits the 103.20/30 band amidst flattish risk appetite trends at the end of the week.

In the meantime, US yields appear to be taking a breather following the marked uptick recorded on Thursday ahead of speeches by FOMC’s C.Waller (permanent voter, hawk) and Philly Fed P.Harker (voter, hawk).

In the meantime, the dollar – and the rest of the global assets – are expected to maintain a somewhat consolidative pace ahead of the publication of key US inflation figures on February 14, always amidst the persistent hawkish narrative from the Federal Reserve vs. investors’ perception that a pivot in the monetary conditions is imminent.

Other than Fed speakers, the US calendar will include the advanced Michigan Consumer Sentiment for the month of February.

What to look for around USD

The dollar remains within a consolidative phase in the upper end of the weekly range above the 103.00 mark against the backdrop of alternating risk appetite trends.

The idea of a probable pivot/impasse in the Fed’s normalization process now looks mitigated in favour of a tighter-for-longer narrative, which appears almost exclusively underpinned by the recent NFP prints. This view, however, is expected to take centre stage in the upcoming speeches by Fed’s rate setters.

The loss of traction in wage inflation, however, seems to lend some support to the view that the Fed’s tightening cycle have started to impact on the robust US labour markets somewhat.

Key events in the US this week: Flash Consumer Sentiment (Friday).

Eminent issues on the back boiler: Rising conviction of a soft landing of the US economy. Slower pace of interest rate hikes by the Federal Reserve vs. shrinking odds for a recession in the next months. Fed’s pivot. Geopolitical effervescence vs. Russia and China. US-China trade conflict.

USD Index relevant levels

Now, the index is gaining 0.03% at 103.21 and faces the next resistance level at 103.96 (monthly high February 7) seconded by 105.63 (2023 high January 6) and then 106.45 (200-day SMA). On the other hand, the breach of 100.82 (2023 low February 2) would open the door to 100.00 (psychological level) and finally 99.81 (weekly low April 21 2022).