USD Index resumes the upside to the 102.70 region

• The index adds to Thursday’s rebound and retests 102.70.
• Further Fed tightening supports the greenback post-Powell.
• Advanced PMIs, Fedspeak next of note in the US docket.

The greenback, when tracked by the USD Index (DXY), gathers extra pace and revisits the vicinity of weekly peaks near 102.70.

USD Index looks at data, Fedspeak

The index extends the optimism in the second half of the week on the back of reinvigorated speculation of extra tightening by the Federal Reserve as well as other major central banks, while recession fears continue to run high.

Indeed, and following Jerome Powell’s semiannual testimonies earlier in the week, inflation pressures are still running high and there is a long way to go in the process of bringing inflation back down to 2%. Powell suggested that the Fed may need to take additional action in the form of more rate hikes, or at the very least, hold rates steady. However, he reassured lawmakers that the Fed's policy moves would continue to evolve as inflation approached the central bank's target.

Later in the NA session, flash Manufacturing and Services PMIs are due for the month of June along with speeches by St. Louis Fed J. Bullard (2025 voter, hawk), Atlanta fed R. Bostic (2024 voter, hawk) and Cleveland Fed L. Mester (2024 voter, hawkish).

What to look for around USD

The greenback leaves behind the recent weakness and bounces off recent multi-week lows in the sub-102.00 zone.

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: 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 0.24% at 102.64 and the breakout of 103.06 (100-day SMA) would open the door to 104.69 (monthly high May 31) and then 105.10 (200-day SMA). On the downside, the next support emerges at 101.92 (monthly low June 16) followed by 100.78 (2023 low April 14) and finally 100.00 (round level).