USD Index looks for direction around 106.20

• The index navigates a narrow range in the low-106.00s.
• US yields maintain the corrective move from recent tops.
• New Home Sales, Mortgage Applications are next on tap.

The greenback, when tracked by the USD Index (DXY), trades in a vacillating fashion around the 106.20 region on Wednesday.

USD Index looks at risk trends, data

The index looks to consolidate the strong recovery past the 106.00 hurdle seen in the previous session amidst the so far absence of a clear direction in US yields and alternating risk appetite trends.

In the meantime, geopolitical concerns appear somewhat alleviated, while expectations of a pause at the Fed’s next event on November 1 remain largely flat. Still around the Fed, speculation of a potential rate hike at the December gathering remains on the rise in light of the persistent resilience of the US economy.

In the US data space, usual weekly Mortgage Applications measured by MBA are due in the first turn seconded by New Home Sales for the month of September. In addition, Chair Powell will give introductory remarks at an event in Washington.

What to look for around USD

The index clings to the area above the 106.00 hurdle following Tuesday’s pronounced rebound.

In the meantime, support for the dollar keeps coming from the good health of the US economy, which at the same time appears underpinned by the renewed tighter-for-longer stance narrative from the Federal Reserve.

Key events in the US this week: MBA Mortgage Applications, New Home Sales, Chair Powell (Wednesday) - Initial Jobless Claims, Durable Goods Orders, Advanced Goods Trade Balance, Flash Q4 GDP Growth Rate (Thursday) – PCE, Core PCE, Personal Income, Personal Spending, Final 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 and the Middle East.

USD Index relevant levels

Now, the index is up 0.04% at 106.28 and the breakout of 106.78 (weekly peak October 13) could expose 107.34 (2023 high October 3) and finally 107.99 (weekly high November 21 2022). On the downside, the next support emerges at 105.36 (monthly low October 24) ahead of 104.42 (weekly low September 11) and then 103.34 (200-day SMA).