USD Index treads water around 102.30 ahead of data, Fedspeak

• The index trades slightly on the defensive around 102.30.
• The dollar meets resistance near the 103.00 mark so far this week.
• The Philly Fed Index, weekly Claims and housing data next on tap.

The greenback, in terms of the USD Index (DXY), remains under pressure in the lower end of the range near 102.30 on Thursday.

USD Index now focuses on data

The index starts the second half of the week somewhat offered in the low-102.00s following Wednesday’s volatile session, where the dollar climbed to the vicinity of the 103.00 hurdle soon afterwards hawkish remarks from FOMC’s L.Mester (Cleveland) and J.Bullard (St. Louis).

In the meantime, market participants continue to gauge the emergence of a pivot in the Fed’s monetary policy stance vs. the persistent hawkish narrative from Fed’s rate setters, who continue to advocate for a move beyond 5% in the interest rate.

Later in the session, Building Permits and Housing Starts are due along with usual weekly Initial Claims as well as the Philly Fed Manufacturing Index.

In addition, Boston Fed S.Collins (voter, centrist) and Vice Chair L.Brainard (permanent voter, dove) are also due to speak.

What to look for around USD

The dollar remains side-lined in the lower end of the recent range near the 102.00 mark on Thursday.

The idea of a probable pivot in the Fed’s policy continues to weigh on the greenback and keeps the price action around the DXY depressed. This view, however, also comes in contrast to the hawkish message from the latest FOMC Minutes and recent comments from fed’s rate-setters, all pointing to the need to advance to a more restrictive stance and stay there for longer, at the time when rates are seen climbing above the 5.0% mark.

On the latter, the tight labour market and the resilience of the economy are also seen supportive of the firm message from the Federal Reserve and the continuation of its hiking cycle.

Key events in the US this week: Building Permits, Housing Starts, Philly Fed Manufacturing Index, Initial Jobless Claims (Thursday) – Existing Home Sales (Friday).

Eminent issues on the back boiler: Rising conviction of a soft landing of the US economy. Prospects for extra rate hikes by the Federal Reserve vs. speculation of 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 losing 0.14% at 102.24 and a breakdown of 101.77 (monthly low January 16) would open the door to 101.29 (monthly low May 30) and finally 100.00 (psychological level). On the other hand, the next hurdle comes at the weekly high at 102.89 (January 18) followed by 105.63 (monthly high January 6) and then 106.44 (200-day SMA).