USD Index recedes from recent tops past 104.00 ahead of data

• The index comes under pressure following recent monthly peaks.
• DXY surpassed the 104.00 level for the first time since January.
• Weekly Claims, Philly Fed Index, Producer Prices next on tap.

The USD Index (DXY), which tracks the greenback vs. a bundle of its main rivals, trades slightly on the defensive below Wednesday’s tops above the 104.00 yardstick.

USD Index looks at data

The index remains within the current consolidative theme following a bullish attempt to levels just beyond the 104.00 hurdle on Wednesday.

In fact, the dollar regained traction on the back of firmer-than-expected results from US fundamentals as well as the unabated hawkish narrative from Fed speakers. Against that, speculation of a higher terminal rate and a Fed’s tighter-for-longer stance remains well on the rise and appears behind the recent bid bias in the dollar.

It will be an interesting session data wise in the US, as usual Initial Claims are due in the first turn seconded by Producer Prices, Building Permits, Housing Starts and the Philly Fed Manufacturing Index.

In addition, Cleveland Fed L.Mester (2024 voter, hawk), St.Louis Fed J.Bullard (2025 voter, hawk) and FOMC Governor L.Cook (permanent voter, centrist) are all due to speak later in the NA session.

What to look for around USD

The dollar remains within a consolidative phase near the 104.00 level against the backdrop of the persistent range bound mood and ahead of further key results in the US docket.

The probable pivot/impasse in the Fed’s normalization process narrative is expected to remain in the centre of the debate along with the hawkish message from Fed speakers, all after US inflation figures for the month of January showed consumer prices are still elevated, the labour market remains tight and the economy maintains its resilience.

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

Key events in the US this week: Building Permits, Housing Starts, Initial Jobless Claims, Philly Fed Index (Thursday) – CB Leading Index (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 0.07% at 103.73 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 next up barrier emerges at 104.11 (monthly high February 15) seconded by 105.63 (2023 high January 6) and then 106.44 (200-day SMA).