USD Index meets some resistance near 103.80 ahead of Powell

• The index faces some selling pressure near recent tops.
• US yields also give away part of the recent marked rebound.
• Chief Powell will take centre stage later in the NA session.

The greenback, when measured by the USD Index (DXY), comes under some downside pressure and recedes from tops near 103.80 (February 6) on turnaround Tuesday.

USD Index now looks at Powell

After three consecutive daily advances, some loss of momentum in the buying interest around the dollar now drags the index to the 103.50/40 band after climbing to multi-week highs near 103.80 at the beginning of the week.

Indeed, DXY trades in a context of rising expectation ahead of the participation by Chair Powell in a discussion panel at the Economic Club of Washington later in the European evening. Powell’s event has grown in importance as of late, particularly following the solid prints from January Nonfarm Payrolls (+517K).

In the US data space, December’s Balance of Trade figures are due followed by the Consumer Credit Change and the speech by FOMC’s M.Barr (permanent voter, centrist).

What to look for around USD

The dollar gives away a small part of the recent 3-day strong rebound to the 103.80 region, as the upcoming speech by Fed’s Powell prompts some prudence among market participants.

The idea of a probable pivot/impasse in the Fed’s normalization process now looks mitigated in favour of a tighter-for-longer narrative, which appears almost exclusively underpinned by the recent NFP prints.

The loss of traction in wage inflation, however, seems to lend some support to the view that the Fed’s tightening cycle have started to impact on the robust US labour markets somewhat.

Key events in the US this week: Balance of Trade, Fed Powell, Consumer Credit Change (Tuesday) – MAB Mortgage Applications, Wholesale Inventories (Wednesday) – Initial Jobless Claims (Thursday) – Flash Consumer Sentiment (Friday).

Eminent issues on the back boiler: Rising conviction of a soft landing of the US economy. Slower pace of interest rate hikes by the Federal Reserve vs. shrinking odds for 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 retreating 0.20% at 103.41 and the breach of 100.82 (2023 low February 2) would open the door to 100.00 (psychological level) and finally 99.81 (weekly low April 21 2022). On the upside, the next barrier emerges at 103.76 (monthly high February 6) seconded by 105.63 (2023 high January 6) and then 106.45 (200-day SMA).