USD Index looks offered around 104.70, focus on data, ECB

• The index faces some selling pressure near 104.70.
• US Producer Prices, Retail Sales, Claims come next in the docket.
• Markets’ attention will also be on the ECB gathering.

The greenback seems to be facing soe headwinds after two daily advances in a row and retreats to the 104.70 zone when tracked by the USD Index (DXY) on Thursday.

USD Index now looks at US data

The index trades within a cautious tone following failed attempts to retest or surpass the 105.00 hurdle in the last couple of sessions.

In the meantime, US yields seem to have entered a consolidative phase in the upper end of the so far monthly range amidst firmer bets that the Federal Reserve might be done hiking rates vs. equally rising speculation of interest rate cuts starting at some point in Q2 2024.

Later in the session, inflation now tracked by Producer Prices will take centre stage along with Retail Sales and the usual weekly Initial Claims.

In addition, extra attention will be on the interest rate decision by the ECB, where consensus appears tilted to a pause.

What to look for around USD

The continuation of the recovery post-Monday’s sharp sell-off in the greenback appears to have faltered ahead of the key 105.00 barrier.

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: Retail Sales, Initial Jobless Claims, Producer Prices, Business Inventories (Thursday) – Industrial Production, Advanced Michigan Consumer Sentiment (Friday).

Eminent issues on the back boiler: Persevering 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 down 0.05% at 104.70 and the breach of 103.02 (200-day SMA) would open the door to 102.93 (weekly low August 30) and then 102.73 (55-day SMA). On the other hand, the next up barrier align at 105.15 (monthly high September 7) ahead of 105.88 (2023 high March 8) and finally 106.00 (round level).