USD Index climbs to 3-week tops past 102.00 ahead of data

• The index gathers further traction and surpasses 102.00.
• US yields continue to trade without a clear direction.
• US ISM Manufacturing PMI will take centre stage.

The greenback, in terms of the USD Index (DXY), extends the recovery to fresh three-week highs north 102.00 the figure on turnaround Tuesday.

USD Index focused on key data

The index adds to Monday’s upbeat session and challenges once again the 102.00 barrier amidst the lack of traction in the broad risk-associated universe in the first half of the week so far.

In the meantime, investors and the FX universe in general appears to have entered a “wait-and-see” mode ahead of crucial releases later in the week (mainly from the US labour market), all amidst the renewed data-dependent stance from the Federal Reserve, as it was reinforced at the latest FOMC gathering on July 26.

In the US data space, the final Manufacturing PMI tracked by S&P Global is due seconded by Construction Spending and the more relevant ISM Manufacturing PMI for the month of July.

What to look for around USD

The index keeps the recovery well in place and maintains its target at the key 102.00 hurdle.

In the meantime, the dollar appears benefited from the post-ECB weakness in the risk-associated space, while it could face extra headwinds in response to the data-dependent stance from the Fed against the current backdrop of persistent disinflation and cooling of the labour market.

Furthermore, speculation that the July hike might have been the last of the current hiking cycle is also expected to keep the buck under some pressure for the time being.

Key events in the US this week: Final Manufacturing PMI, ISM Manufacturing, Construction Spending (Tuesday) – MBA Mortgage Applications, ADP Employment Change (Wednesday) – Initial Jobless Claims, Final Services PMI, ISM Services PMI, Factory Orders (Thursday) – Nonfarm Payrolls, Unemployment Rate (Friday).

Eminent issues on the back boiler: Persistent debate over a soft or hard landing for the US economy. Terminal Interest rate near the peak vs. speculation of rate cuts in late 2023 or early 2024. Geopolitical effervescence vs. Russia and China. US-China trade conflict.

USD Index relevant levels

Now, the index is gaining 0.08% at 101.93 and the breakout of 102.55 (55-day SMA) would open the door to 103.54 (weekly high June 30 and finally 103.69 (200-day SMA). On the other hand, immediate contention emerges at 100.55 (weekly low July 27) prior to 100.00 (psychological level) and then 99.57 (2023 low July 13).