US Dollar Index slides below 109.00 despite hawkish Fed bets, US Consumer Confidence, NFP eyed

• US Dollar Index stays pressured after reversing from fresh 19-year high.
• Markets pricing 72.5% chances of 75 bps Fed rate hikes in September.
• US NFP appears more interesting after Fed Chair Powell raised recession, employment concerns.
• Yields retreat amid market’s consolidation ahead of the key US data.

US Dollar Index (DXY) holds onto the week-start pullback from nearly a two-decade high during Tuesday’s Asian session, pressured around 108.60 by the press time. In doing so, the greenback gauge pares recent gains in search of fresh clues ahead of today’s US CB Consumer Confidence for August, as well as Friday’s Nonfarm Payrolls (NFP).

The DXY’s pullback from the multi-year high could be linked to the improvement in the US data, as well as mixed comments from the Fed policymaker, on Monday.

That said, Dallas Fed Manufacturing Business Index improved to -12.9 versus -20.2 expected and -22.6 prior. It should be noted that Minneapolis Federal Reserve Bank President Neel Kashkari stated that people now understand how serious we are about getting inflation back to 2%.

Also likely to have contributed to the quote’s weakness are the latest headlines that Europe approaches the gas storage target early despite Russia’s supply cut, per Bloomberg.

Even so, Fed Chair Jerome Powell’s sturdy push towards higher rates, despite caring for recession and/or employment slowdown, seems to keep the DXY buyers hopeful. On the same line could be the jump in the market’s hopes of a 0.75% rate hike by the US Federal Reserve (Fed) in September, after paring back the hawkish expectations previously. As per the latest readings of the CME FedWatch Tool, there is a 72.5% chance of the Fed’s 75 basis points (bps) rate hike in the next month’s Federal Open Market Committee (FOMC).

Against this backdrop, the US 10-year Treasury yields retreat to 3.10% following the two-day uptrend to refresh the monthly high. With this, the S&P 500 Futures print mild losses even as Wall Street closed in the red.

To sum up, a light calendar in Asia emphasizes the US Consumer Confidence for August and comments from Fed speakers as the main catalysts to watch for fresh impulse. However, major attention will be given to Friday’s US jobs report as Fed Chair Powell raised concerns over economic slowdown and job market stress in his Jackson Hole speech.

Technical analysis

A failure to provide the daily closing beyond the 109.30 hurdle directs DXY bears towards the 10-DMA support near 108.30.