US Dollar Index struggles to defend recovery above 104.00 ahead of US GDP

• US Dollar Index remains sidelined after snapping two-day downtrend.
• Firmer US data, challenges to sentiment underpin DXY rebound.
• Pullback in Treasury bond yields, holiday mood restrict immediate upside.
• Final readings of US Q3 GDP, PCE details eyed for clear directions.

US Dollar Index (DXY) remains indecisive around 104.20, struggles to extend the previous day’s rebound during Thursday’s sluggish Asian session. In doing so, the greenback’s gauge versus the six major currencies portrays the market’s holiday mood, as well as the cautious sentiment ahead of this week’s key data, namely the US Dollar Index struggles to defend recovery above 104.00 ahead of US GDP

The DXY cheered upbeat US data and challenges to sentiment emanating from Russia to print the first daily gain in three the previous day.

That said, the US Conference Board’s (CB) Consumer Confidence jumped to the eight-month high of 108.3 for December, compared to the market forecasts of 101.0 and the revised prior readings of 101.40. On the other hand, Ukrainian President Volodymyr Zelensky’s US visit and Russian President Vladimir Putin’s readiness to increase the country’s military potential challenge the risk appetite.

Alternatively, a pullback in the US Treasury bond yields joined risk-positive news from China to probe the US Dollar Index buyers. The US 10-year Treasury bond yields remain sidelined near 3.66% after retreating from the monthly high of 3.72% the previous day. On the other hand, the US two-year bond coupons remain pressured around 4.22% after a two-day downtrend.

Recently, hopes of faster economic recovery in Germany and mixed comments from the European Central Bank (ECB) official Mario Centeno join mixed comments from US President Joe Biden and Ukrainian President Zelensky to restrict the DXY moves amid mixed mood. While portraying the mood, the S&P 500 Futures print mild gains amid sluggish yields and mixed performance in the Asia-Pacific markets.

Moving on, risk catalysts could direct intraday DXY moves ahead of the US GDP and Core PCE data for Q3. US GDP is expected to confirm 2.9% Annualized growth in Q3 while the Core PCE is anticipated to also meet the initial forecasts of 4.6% QoQ during the stated period. Also important will be Friday’s Core PCE Price Index for November, the Fed’s preferred inflation gauge.

Technical analysis

A five-week-old bearish channel restricts DXY moves between 102.90 and 104.60.