USD Index looks range bound near 105.70, looks at US CPI

• The index trades without a clear direction on Tuesday.
• All the attention will be on the release of October CPI figures.
• Fed’s Barr, Goolsbee and Mester also speaks later.

The USD Index (DXY), which gauges the greenback vs. a bundle of its main rival currencies, alternates gains with losses around the 105.70 zone on turnaround Tuesday.

USD Index focuses on CPI, Fedspeak

The index navigates a narrow range in the sub-106.00 region so far, as investors’ sentiment remains flat ahead of the release of key US inflation figures for the month of October due later in the NA session.

Furthermore, the consolidation sentiment in the index seems to be supported by the subdued movement in US yields, while contradictory statements from certain Fed speakers contribute to the perception that the Federal Reserve may maintain a tighter monetary policy for an extended period. At the same time, investors also hold the belief that the central bank has finished raising interest rates.

Other than the release of US CPI, FOMC M. Barr (permanent voter, centrist), Chicago Fed A. Goolsbee (voter, centrist) and Cleveland Fed L. Mester (2024 voter, hawk) are also due to speak.

What to look for around USD

So far this week, the index has faced a firm resistance level of 106.00, all while recovering from lows in the sub-105.00 range earlier in the month.

In the meantime, the dollar appears to have regained some poise in response to recent hawkish Fedspeak and on the back of the broad-based good health of the US economy, while inflation is still running well above the Fed’s target.

Propping up an impasse of the Fed’s tightening campaign, however, emerges the continuation of some cooling of the US labour market, as per the latest prints from Nonfarm Payrolls in October (+150K jobs).

Key events in the US this week: Inflation Rate (Tuesday) – MBA Mortgage Applications, Producer Prices, Retail Sales, Business Inventories (Wednesday) - Initial Jobless Claims, Philly Fed Index, Industrial Production, NAHB Index, TC Flows (Thursday) – Building Permits, Housing Starts (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 0.02% at 105.68 and the breakout of 106.00 (weekly high November 10) could pave the way to a move to 106.88 (weekly high October 26) and finally 107.34 (2023 high October 3). On the flip side, there is an initial support at 104.84 (monthly low November 6) ahead of 104.42 (weekly low September 11) and then 103.61 (200-day SMA).