USD Index regains composure and flirts with 106.00

• The index reverses part of the weekly drop on Friday.
• Market conditions are expected to remain thin due to US inactivity.
• The risk complex sees some profit taking at the end of the week.

The greenback, in terms of the USD Index (DXY), manages to regain some balance and bounces off recent lows near 105.60 at the end of the week.

USD Index looks to risk trends

The dollar sees its buying interest somewhat re-emerged on Friday after three consecutive daily pullbacks and attempts to reclaim the 106.00 neighbourhood, all after Thursday’s multi-day lows.

Indeed, the better tone in the greenback comes in tandem with some profit taking in the risk complex, which saw its sentiment improve markedly since last Tuesday and later helped by the release of the FOMC Minutes.

Absent data releases in the US calendar and with markets closing early, the broad risk appetite trends are expected to dictate the sentiment among investors at the end of the week amidst the Thanksgiving Day hangover.

What to look for around USD

The weekly leg lower in the dollar seems to have met some contention around 105.60, triggering a mild rebound afterwards in line with some renewed selling bias in the risk-associated universe.

While hawkish Fedspeak maintains the Fed’s pivot narrative in the freezer, upcoming results in US fundamentals would likely play a key role in determining the chances of a slower pace of the Fed’s normalization process in the short term.

Key events in the US this week: Early markets close (Friday).

Eminent issues on the back boiler: 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 0.16% at 105.80 and faces the immediate resistance at 107.99 (weekly high November 21) followed by 109.15 (100-day SMA) and then 110.48 (55-day SMA). On the other hand, the breakdown of 105.34 (monthly low November 15) would open the door to 105.31 (200-day SMA) and finally 104.63 (monthly low August 10).