USD Index treads water near 110.50 ahead of US CPI

• The index alternates gains with losses around 110.50.
• Markets’ attention will be on the release of US inflation figures.
• Weekly Jobless Claims, Fedspeak also on tap later in the day.

The greenback, when tracked by the USD Index (DXY), trades without a clear direction near Wednesday’s close around 110.50 on Thursday.

USD Index focuses on data

The index loses some momentum following Wednesday’s strong advance north of the 110.00 barrier amidst rising cautiousness ahead of the release of the US Inflation Rate for the month of October.

The inconclusive price action in the dollar comes in tandem with the equally lack of clear direction in US yields across the curve, all in response to the still unclear results from the US midterm elections.

Other than the publication of the US CPI, the US docket includes the usual Initial Jobless Claims, the Monthly Budget Statement and speeches by Philly Fed P.Harker (2023 voter, hawk), Dallas Fed L.Logan (2023 voter, centrist), Cleveland Fed L.Mester (voter, hawk) and Kansas City Fed E.George (voter, hawk).

What to look for around USD

The dollar’s recovery stalled around the 110.50 region so far this week ahead of the release of key US data on Thursday.

In the meantime, the firmer conviction of the Federal Reserve to keep hiking rates until inflation looks well under control regardless of a likely slowdown in the economic activity and some loss of momentum in the labour market continues be the main source of strength for the dollar so far.

Looking at the more macro scenario, the greenback also appears bolstered by the Fed’s divergence vs. most of its G10 peers in combination with bouts of geopolitical effervescence and occasional re-emergence of risk aversion.

Key events in the US this week: Inflation Rate, Initial Jobless Claims, Monthly Budget Statement (Thursday) – Preliminary Michigan Consumer Sentiment (Friday).

Eminent issues on the back boiler: US midterm elections. Hard/soft/softish? landing of the US economy. Prospects for further 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 persistent trade conflict.

USD Index relevant levels

Now, the index is advancing 0.08% at 110.53 and faces the next hurdle at 113.14 (monthly high November 3) followed by 113.88 (monthly high October 13) and then 114.76 (2022 high September 28). On the other hand, the breakdown of 109.35 (weekly low September 20) would open the door to 107.68 (monthly low September 13) and finally 104.74 (200-day SMA).