USD Index regains composure and retargets 105.00, focus on US CPI

• The index reclaims part of the ground lost on Monday.
• Investors’ attention remains on the release of US inflation figures.
• The NFIB Index, API report are next on tap in the US docket.

The greenback, when measured by the USD Index (DXY), manages to pick up some traction and regains the 104.70/80 band on turnaround Tuesday.

USD Index looks bid ahead of key data

The index resumes the upside following the negative start of the week amidst some selling pressure in the risk complex, lack of direction in US yields and prudence ahead of the publication of US inflation figures on September 13.

Looking at the more macro scenario, markets continue to see the Fed’s July rate hike as the last one of the current hiking cycle, while interest rate cuts are seen commencing at some point in Q2 2024.

Later in the session, the only release in the US data space will be the NFIB Business Optimism Index ahead of the API’s weekly report on US crude oil inventories for the week ended on September 8.

What to look for around USD

The index rebounds from Monday’s four-day lows near 104.40 and seems to have refocused its attention to the 105.00 zone for the time being.

In the meantime, support for the dollar keeps coming from the good health of the US economy, despite the narrative around the tighter-for-longer stance from the Federal Reserve now looks somewhat diminished amidst the current backdrop of persistent disinflation and cooling of the labour market.

Key events in the US this week: MBA Mortgage Applications, Inflation Rate, Monthly Budget Statement (Wednesday) – Initial Jobless Claims, Producer Prices, Business Inventories (Thursday) – Industrial Production, Advanced Michigan Consumer Sentiment (Friday).

Eminent issues on the back boiler: Persevring 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 advancing 0.20% at 104.73 and faces the next up barrier at 105.15 (monthly high September 7) ahead of 105.88 (2023 high March 8) and finally 106.00 (round level). On the other hand, the breach of 103.02 (200-day SMA) would open the door to 102.93 (weekly low August 30) and then 102.67 (55-day SMA).