USD Index appears offered near 103.20, looks at data, risk trends

• The index gives away some gains in the low-103.00s.
• The dollar appears stuck within the weekly range.
• Usual weekly Initial Claims will be the salient event later in the session.

The USD Index (DXY), which tracks the greenback vs. a bundle of its main rival currencies, trades on the defensive in the 103.20 region on Thursday.

USD Index remains side-lined above 103.00

The index so far fades Wednesday’s decent uptick amidst the better tone in the risk complex. The index, however, maintains the range bound theme in the upper end of the weekly range, which appears at the same time capped by the vicinity of 104.00.

In the meantime, the dollar’s price action continues to look at the persistent debate between the relentless hawkish narrative from Fed’s policy makers vs. markets’ expectations of an impasse in the current tightening cycle.

On this, Fed’s Williams, Kashkari and Cook advocated on Wednesday for the continuation of the current hiking cycle beyond the 5% level and stay around those levels for some time.

In the US data space, Initial Jobless Claims will be the sole release of note across the Atlantic on Thursday.

What to look for around USD

The dollar remains within a consolidative phase in the upper end of the weekly range above the 103.00 mark against the backdrop of alternating risk appetite trends.

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. This view, however, is expected to take centre stage in the upcoming speeches by Fed’s rate setters.

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: 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 0.14% at 103.32 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 other hand, the immediate up barrier emerges at 103.96 (monthly high February 7) seconded by 105.63 (2023 high January 6) and then 106.45 (200-day SMA).