USD Index extends its recover and targets 106.00, focus on Powell

• The index pushes harder and approaches 106.00.
• US yields trade in a mixed tone so far on Wednesday.
• Chair Powell speaks later in the NA session.

The greenback extends its weekly bounce and approaches the key 106.00 yardstick when gauged by the USD Index (DXY) on Wednesday.

USD Index looks firmer ahead of Powell

The index moves higher and builds on the weekly recovery near the 106.00 region on the back of further loss of momentum in the risk-associated universe and the so far lack of clear direction in US yields.

In the meantime, investors are expected to closely follow Chief Powell’s comments later in the session, particularly against the current contrasting backdrop of rising speculation of a pause in the Fed’s normalization programme and Fedspeak leaving the door open to potential extra tightening in the short-term horizon.

In the US data space, Mortgage Applications tracked by MBA are due in the first turn seconded by Wholesale Inventories. In addition, NY Fed J. Williams (permanent voter, centrist), FOMC Governor M. Barr (permanent voter, centrist) and FOMC Governor P. Jefferson (permanent voter, centrist) area all due to speak.

What to look for around USD

The index continues to recoup ground lost and trades closer to the key barrier at 106.00 so far on Wednesday.

In the meantime, the dollar loses some composure despite the broad-based good health of the US economy and the inflation still running above the Fed’s target, while further cooling of the US labour market now appear to underpin a protracted impasse in the Fed’s current restrictive stance.

Key events in the US this week: MBA Mortgage Applications, Wholesale Inventories, Chair Powell (Wednesday) - Initial Jobless Claims, Chair Powell (Thursday) – Flash Michigan Consumer Sentiment (Friday).

Eminent issues on the back boiler: Persistent debate over a soft or hard landing for the US economy. Speculation of rate cuts in early 2024. Geopolitical effervescence vs. Russia and China. Potential spread of the Middle East crisis to other regions.

USD Index relevant levels

Now, the index is up 0.21% at 105.73 and the breakout of 106.88 (weekly high October 26) could expose 107.34 (2023 high October 3) and finally 107.99 (weekly high November 21 2022). On the other hand, initial support is seen at 104.84 (monthly low November 6) ahead of 104.42 (weekly low September 11) and then 103.55 (200-day SMA).