USD Index adds to recent gains near 102.00 ahead of key US data

• The index extends the optimism and retargets 102.00.
• US yields pick up extra pace along the curve on Friday.
• Final Consumer Sentiment, PCE, housing data next on tap.

The greenback, in terms of the USD index (DXY), maintains the bullish outlook and refocuses on the 102.00 barrier and beyond at the end of the week.

USD Index remains supported near 101.50

The index advances for the second session in a row and keeps the positive performance unchanged in the second half of the week, although a convincing breakout of the 102.00 barrier still remains elusive.

In the meantime, the dollar appears propped up by recent positive results from the US calendar, particularly after the US economy expanded more than initially estimated during the last quarter of 2022 (+2.9%), as per Thursday’s GDP figures.

The improvement in the buck also comes in tandem with extra recovery in US yields across the curve.

In the US data space, inflation figures tracked by the PCE will take centre stage seconded by the final Michigan Consumer Sentiment, Pending Home Sales and Personal Income/Spending.

What to look for around USD

The dollar wakes up and rebounds from recent lows in the 101.50 region, although a sustainable breakout of the 102.00 hurdle still remains to be seen.

The idea of a probable pivot in the Fed’s policy continues to weigh on the greenback and keeps the price action around the DXY subdued. This view, however, also comes in contrast to the hawkish message from the latest FOMC Minutes and recent comments from rate setters, all pointing to the need to advance to a more restrictive stance and stay there for longer, at the time when rates are seen climbing above the 5.0% mark.

On the latter, the tight labour market and the resilience of the economy are also seen supportive of the firm message from the Federal Reserve and the continuation of its hiking cycle.

Key events in the US this week: PCE, Core PCE, Personal Income, Personal Spending, Pending Home Sales, Final Michigan Consumer Sentiment (Friday).

Eminent issues on the back boiler: Rising conviction of a soft landing of the US economy. Prospects for extra 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 up 0.12% at 101.93 and the immediate hurdle comes at the weekly high at 102.89 (January 18) followed by 105.63 (monthly high January 6) and then 106.47 (200-day SMA). On the flip side, the breach of 101.50 (2023 low January 26) would open the door to 101.29 (monthly low May 30 2022) and finally 100.00 (psychological level).