USD Index regains traction and bounces off 103.00, looks at data

• The index leaves behind three consecutive daily pullbacks.
• Initial support for DXY emerges around 103.00 so far.
• PCE, weekly Claims take centre stage in the US docket.

The greenback manages to regain some composure and encourages the USD Index (DXY) to rebound from recent two-week lows around 103.00 on Thursday.

USD Index looks bid ahead of data

The index advances modestly in the wake of the opening bell in the old continent on Thursday, putting some distance from Wednesday’s two-week lows in the 103.00 neighbourhood.

The better tone in the dollar comes on the back of a tepid loss of momentum in the risk-associated complex, while US yields remain slightly on the defensive across the curve, reflecting investors’ repricing of an extended impasse in the Fed’s hiking cycle.

Later in the US data space, the publication of inflation figures gauged by the PCE and Core PCE will take precedence over weekly Initial Claims, Personal Spending and Personal Income. In addition, Boston Fed Susan Collins (2025 voter, centrist) is due to speak later in the NA session.

What to look for around USD

The index regains some balance following a sharp three-session data-driven pullback to the boundaries of the 103.00 region earlier in the week.

In the meantime, support for the dollar keeps coming from the good health of the US economy, which seems to have reignited the narrative around the tighter-for-longer stance from the Federal Reserve.

Running on the opposite side of the road, the idea that the dollar could face headwinds in response to the data-dependent stance from the Fed against the current backdrop of persistent disinflation and cooling of the labour market appears to have regained some traction as of late.

Key events in the US this week: PCE, Core PCE, Personal Income, Personal Spending, Chicago PMI, Initial Jobless Claims (Thursday) – Nonfarm Payrolls, Unemployment Rate, Final Manufacturing PMI, ISM Manufacturing PMI, Construction Spending (Friday).

Eminent issues on the back boiler: Persistent debate over a soft or hard landing for the US economy. Incipient speculation of rate cuts in early 2024. Geopolitical effervescence vs. Russia and China.

USD Index relevant levels

Now, the index is gaining 0.19% at 103.68 and the breakout of 104.44 (monthly high August 25) would open the door to 104.69 (monthly high May 31) and finally 105.88 (2023 high March 8). On the downside, immediate support emerges at 103.07 (200-day SMA) followed by 102.34 (55-day SMA) and then 101.74 (monthly low August 4).