USD Index remains offered near 105.00 amidst strong risk appetite

• The index keeps the bearish noted unchanged near 105.00.
• The favourable risk-on mood continues to weigh on the dollar.
• US yields add to Tuesday’s decline across the curve.

The greenback, when measured by the USD Index (DXY), remains under pressure and near the 105.00 neighbourhood on Wednesday.

USD Index weaker on stronger risk appetite

The index probes the area of 2-day lows in the 104.90/85 band midweek, as investors’ preference for the risk complex seems to have gathered extra pace in response to further re-opening in China.

In line with the daily retracement in the dollar, US yields accelerate the decline to new multi-week lows in the belly and the long end of the curve, while the short end trade in 3-session lows so far.

In the calendar, MBA Mortgage Applications contracted 1.9% in the week to December 2, while Consumer Credit Change is due later in the NA session.

What to look for around USD

The dollar remains offered as investors seem to have digested the recent hawkish messages from some Fed’s policy makers as well as above-expectations results from some US fundamentals.

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: MBA Mortgage Applications, Consumer Credit Change (Wednesday) – Initial Jobless Claims (Thursday) – Producer Prices, Advanced Michigan Consumer Sentiment, Wholesale Inventories (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 retreating 0.47% at 105.06 and the breakdown of 104.11 (monthly low December 5) would open the door to 103.41 (weekly low June 16) and finally 101.29 (monthly low May 30). On the other hand, the next hurdle comes at 105.82 (weekly high December 7) seconded by 107.19 (weekly high November 30) and then 107.99 (weekly high November 21).