USD Index extends the weekly advance and targets 102.00 ahead of key data

• The index adds to Thursday’s gains and approaches 102.00.
• US yields trade in a mixed fashion so far on Friday.
• Inflation tracked by the PCE, Consumer Sentiment next on tap.

The USD Index (DXY), which gauges the greenback vs. a bundle of its main rival currencies, extends the optimism seen in the second half of the week and trades at shouting distance from the key hurdle at 102.00 the figure on Friday.

USD Index focused on US data

The index continues to build on Thursday’s gains on the back of the generalized bearish note in the risk complex, which was particularly magnified following the dovish tone from the ECB and its impact on the European currency at its event in the previous session.

In the meantime, the index flirts with multi-session tops near the 102.00 barrier on the back of a small recovery in yields in the belly and the long end of the curve vs. some weakness observed in the short end, especially in the wake of the FOMC gathering on Wednesday.

Data-wise in the US docket, inflation figures measured by the PCE/Core PCE are expected to take centre stage along with Personal Income, Personal Spending, Employment Cost Index and the final print of the Consumer Sentiment for the current month.

What to look for around USD

The index keeps the recovery well in place and already trades closer to the key 102.00 hurdle.

In the meantime, the dollar appears benefited from the post-ECB weakness in the risk-associated space, while it could face extra headwinds in response to the data-dependent stance from the Fed against the current backdrop of persistent disinflation and cooling of the labour market.

Furthermore, speculation that the July hike might have been the last of the current hiking cycle is also expected to keep the buck under some pressure for the time being.

Key events in the US this week: PCE, Core PCE, Personal Income, Personal Spending and Final Michigan Consumer Sentiment (Friday).

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

USD Index relevant levels

Now, the index is gaining 0.22% at 101.92 and the breakout of 102.58 (55-day SMA) would open the door to 103.54 (weekly high June 30 and finally 103.78 (200-day SMA). On the other hand, immediate contention emerges at 100.00 (psychological level) prior to 99.57 (2023 low July 13) and then 97.68 (weekly low March 30).