US Dollar Index looks cautious around 104.50 ahead of data

• DXY alternates gains with losses in the mid-104.00s.
• US yields remain directionless around Tuesday’s close.
• Focus on data and Powell-Bailey-Lagarde discussion panel.

The greenback, in terms of the US Dollar Index (DXY), returns to the 104.50 region following an unsuccessful move to the 104.70 region earlier on Wednesday.

US Dollar Index focuses on Sintra, data

The index looks to add to Tuesday’s strong rebound beyond the 104.00 hurdle amidst the generalized cautious stance among investors, which underpinned the re-emergence of the risk aversion mood earlier in the session.

In the meantime, US yields remain muted across the curve and seem to have embarked on a consolidative phase for the time being.

Later in the session, market participants and the FX universe are expected to closely follow the discussion panel between Fed’s J.Powell, BoE’s J.Bailey and ECB’s C.Lagarde.

In addition, usual MBA Mortgage Applications are due seconded by the final print of the US Q1 GDP Growth Rate.

What to look for around USD

Renewed risk-off sentiment motivated the index to reclaim the area above the 104.00 mark on Tuesday, although the bullish attempt appears to have run out of steam in the 104.70 zone so far.

The dollar, in the meantime, remains well supported by the Fed’s divergence vs. most of its G10 peers (especially the ECB) in combination with bouts of geopolitical effervescence, higher US yields and a potential “hard landing” of the US economy, all factors suggesting a stronger dollar in the next months.

Key events in the US this week: MBA Mortgage Applications, Final Q1 GDP Growth Rate (Wednesday) – PCE, Core PCE, Personal Income, Personal Spending, Initial Claims (Thursday) – ISM Manufacturing, Final Manufacturing PMI (Friday).

Eminent issues on the back boiler: Hard/soft/softish? landing of the US economy. Escalating geopolitical effervescence vs. Russia and China. Fed’s more aggressive rate path this year and 2023. US-China trade conflict. Future of Biden’s Build Back Better plan.

US Dollar Index relevant levels

Now, the index is up 0.04% at 104.53 and faces the next contention at 103.41 (weekly low June 16) seconded by 103.01 (55-day SMA) and finally 101.29 (monthly low May 30). On the other hand, a break above 104.94 (weekly high June 22) would expose 105.78 (2022 high June 15) and then 107.31 (monthly high December 2002).