USD Index comes under pressure near 102.30
- The index gives away part of the recent gains on Tuesday.
- FOMC’s Williams sees inflation around 3.75% this year.
- Philly Fed P.Harker will speak later in the session.
Following Monday’s peaks near 102.80, the greenback gives away part of that advance and retreats to the 102.30 region when tracked by the USD Index (DXY) on Tuesday.
USD Index focuses on inflation figures
The multi-session recovery in the index loses some momentum on turnaround Tuesday on the back of some recovery in the risk complex and amidst rising cautiousness ahead of the release of US inflation figures for the month of March due on Wednesday.
In the meantime, US yields trade in a flattish fashion ahead of the opening bell in the old continent against the backdrop of still firmer conviction of a 25 bps rate hike by the Federal Reserve at the May 3 gathering.
Still around the Fed, NY Fed J.Williams said on Monday that inflation should return to the 2.0% target by 2025, while he sees consumer prices rising 3.75% this year. He also expects the economy to expand less than 1% in 2023 and the unemployment to rise to the 4.0%-4.5% area.
In the US data space, the only event will be the speech by Philly Fed P.Harker (voter, hawk) later in the NA session.
What to look for around USD
Price action around the index shows some weakness in the low-102.00s on Tuesday, all after testing the 102.80 region in quite a promising start of the week.
The recent marked recovery in the dollar has been underpinned by the loss of momentum in the view that the Federal Reserve could make an impasse in its current tightening bias in May, which has been also propped up by persevering disinflation, nascent weakness in some key fundamentals and fresh concerns surrounding the banking sector
Key events in the US this week: MBA Mortgage Applications, Inflation Rate, Monthly Budget Statement, FOMC Minutes (Wednesday) – Producer Prices, Initial Jobless Claims (Thursday) – Retail Sales, Industrial Production, Advanced Michigan Consumer Sentiment, Business Inventories (Friday).
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 2024. Fed’s pivot. Geopolitical effervescence vs. Russia and China. US-China trade conflict.
USD Index relevant levels
Now, the index is retreating 0.21% at 102.33 and the breach of 101.43 (monthly low April 5) would open the door to 100.82 (2023 low February 2) and finally 100.00 (psychological level). On the other hand, the next resistance level emerges at 103.05 (monthly high April 3) seconded by 103.71 (100-day SMA) and then 105.11 (weekly high March 15).