USD Index picks up pace and flirts with 102.00 ahead of data

• The index keeps the erratic performance around 102.00 on Friday.
• The risk-off mood prevails early in the European session.
• Flash Manufacturing/Services PMIs next of note later in the docket.

The greenback, in terms of the USD Index (DXY), sets aside Thursday’s pullback and manages to gather fresh steam and retests the 102.00 zone.

USD Index now looks at flash PMIs

The index keeps navigating choppy waters so far this week, always around the 102.00 neighbourhood and amidst alternating risk appetite trends.

The recovery in the dollar so far comes amidst another corrective pullback in US yields across the curve, while a 25 bps rate hike by the Fed at the May 3 meeting appears largely anticipated and consensus following a pause in the hiking cycle following the May event still seems quite divided.

In the US data space, advanced Manufacturing and Services PMIs will take centre stage later in the NA session.

What to look for around USD

The absence of strong catalysts leaves the price action around the dollar – and the rest of the FX space – somewhat muted around the 102.00 region so far this week.

In the meantime, the marked retracement in the buck since March has been underpinned by the pick-up in the perception that the Federal Reserve could make a pause in its current tightening cycle just after the May meeting.

In favour of a pivot in the Fed’s normalization process, however, still emerges the persevering disinflation, nascent weakness in some key fundamentals and somewhat persistent concerns surrounding the banking sector.

Key events in the US this week: Flash Manufacturing/Services PMIs (Friday).

Eminent issues on the back boiler: Persistent debate over a soft/hard landing of the US economy. Terminal Interest rate near the peak vs. speculation of rate cuts in 2024. Fed’s pivot. Geopolitical effervescence vs. Russia and China. US-China trade conflict.

USD Index relevant levels

Now, the index is gaining 0.16% at 101.95 and faces the next hurdle at 102.80 (weekly high April 10) followed by 103.05 (monthly high April 3) and then 103.31 (55-day SMA). On the flip side, the breach of 100.78 (2023 low April 14) would open the door to 100.00 (psychological level) and finally 99.81 (weekly low April 21 2022).