USD Index struggles for direction near 102.00 ahead of data, Powell

• The index alternates gains with losses near 102.00.
• Chief J. Powell will testify once again later in the session.
• Weekly Claims, housing data, Fedspeak next on tap in the docket.

The USD Index (DXY), which gauges the greenback vs. a bundle of its main competitors, trades in a cautious tone near the 102.00 area on Thursday.

USD Index looks at data, Powell

The index navigates in the lower end of the monthly range near the 102.00 neighbourhood following Wednesday’s post-Powell sharp pullback.

Indeed, the greenback saw its decline gather impulse despite Fed’s Jerome Powell signalled that further interest rate hikes remain in store, as the battle to tackle inflation is far from over.

Chief Powell will testify once again later on Wednesday, this time before the Committee on Banking, Housing and Urban Affairs, and investors expect the message to fall in line with the previous one.

In the US data space, usual Initial Jobless Claims are due seconded by the Chicago Fed National Activity Index, the CB Leading Index, Existing Home Sales and speeches by FOMC C. Waller (permanent voter, hawk), FOMC M. Bowman (permanent voter, centrist), Cleveland Fed L. Mester (2024 voter, hawk) and Richmond Fed T. Barkin (2024 voter, centrist).

What to look for around USD

The greenback comes under pressure and challenges the key monthly support around the 102.00 zone in the second half of the week.

Meanwhile, the likelihood of another 25 bps hike at the Fed's upcoming meeting in July remains high, supported by the continued strength of key US fundamentals such as employment and prices.

This view was further bolstered by comments from Fed Chief Powell at the June FOMC event, who referred to the July meeting as "live" and indicated that most of the Committee is prepared to resume the tightening campaign as early as next month.

Key events in the US this week: Chicago Fed National Activity Index, Initial Jobless Claims, Fed’s Powell Testimony, Existing Home Sales (Thursday) – Advanced 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 late 2023/early 2024. Fed’s pivot. Geopolitical effervescence vs. Russia and China. US-China trade conflict.

USD Index relevant levels

Now, the index is gaining 0.01% at 102.07 and the breakout of 103.06 (100-day SMA) would open the door to 104.69 (monthly high May 31) and then 105.18 (200-day SMA). On the downside, the next support emerges at 102.00 (monthly low June 16) followed by 100.78 (2023 low April 14) and finally 100.00 (round level).