USD Index treads water above 103.00 amidst a cautious tone

• The index lacks conviction to move on either direction on Tuesday.
• US yields regain some composure and bounce off recent lows.
• No comments on monetary policy from Powell in Sweden.

The greenback, in terms of the USD Index (DXY) keeps the inconclusive performance well in place following the opening bell in Wall St. on Tuesday.

USD Index remains prudent ahead of key releases

The index attempts to leave behind part of the recent steep pullback, although the absence of catalysts coupled with rising prudence in light of the release of US inflation figures later in the week keeps the price action subdued for the time being.

In the meantime, DXY navigates a tight range amidst a decent rebound in US yields across the curve, which manage to halt a multi-session negative streak at the same time.

In the calendar, the NFIB Business Optimism Index eased to 89.8 in December (from 91.9). Later in the NA session, Wholesale Inventories and the IBD/TIPP index area also due.

What to look for around USD

So far, the greenback remains under pressure in the low-103.00s against the backdrop of alternating risk appetite trend and pre-CPI cautiousness.

The mixed results from the US Nonfarm Payrolls for the month of December (Friday) seem to have reignited the idea of a probable pivot in the Fed’s policy in the next months, which comes in contrast to the message from the latest FOMC Minutes, where the Committee advocated the need to remain within a restrictive stance for longer, at the time when it ruled out any interest rate reduction for the current year.

Furthermore, the tight labour market, still elevated inflation and the resilient economy are also seen supportive of the firm message from the Federal Reserve and its hiking cycle.

Key events in the US this week: Wholesale Inventories, Fed’s Powell (Tuesday) – MBA Mortgage Applications (Wednesday) – Inflation Rate, Initial Jobless Claims, Monthly Budget Statement (Thursday) – Flash Michigan Consumer Sentiment (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 trade conflict.

USD Index relevant levels

Now, the index is losing 0.02% at 103.15 and the breach of 102.94 (monthly low January 9) would open the door to 101.29 (monthly low May 30) and finally 100.00 (psychological level). On the upside, the next hurdle comes at 105.63 (monthly high January 6) followed by 106.35 (200-day SMA) and then 107.19 (weekly high November 30).