USD Index appears bid near 104.50 ahead of data, Fedspeak

• The index hovers around the mid-104.00s.
• Speculation of Fed’s rate cuts next year remain firm.
• Weekly Claims, Philly Fed index take centre stage.

The USD Index (DXY), which measures the greenback vs. a bundle of its main competitors, trades with humble losses around the 104.50 region on Thursday.

USD Index focuses on data

The index navigates a range bound theme around 104.50 ahead of the opening bell in the old continent on Thursday.

In fact, the index extends its recovery for the second session in a row following Tuesday’s post-CPI collapse to the sub-104.00 region, or multi-week lows.

The rebound in the dollar also comes in tandem with some improvement in US yields and against the backdrop of rising speculation that the Federal Reserve could start reducing its interest rates at some point in H1 2024.

Later on Thursday, usual weekly Initial Claims and the Philly Fed index will be in the limelight seconded by Industrial Production and the NAHB Index.

In addition, FOMC L. Cook (permanent voter, centrist), FOMC M. Barr (permanent voter, centrist), Cleveland Fed L. Mester (2024 voter, hawk), NY Fed J. Williams (permanent voter, centrist) and FOMC C. Waller (permanent voter, hawk) are all due to speak.

What to look for around USD

The pronounced decline in the index appears to have met some initial contention around the 104.00 region, or eleven-week lows, so far this week.

In the meantime, the dollar appears depressed against the backdrop of rising speculation of probable interest rate cuts in H1 2024, all in response to further disinflationary pressures and the gradual cooling of the labour market.

Bolstering the greenback, however, still emerges the resilience of the US economy as well as a hawkish narrative from some Fed rate setters.

Key events in the US this week: 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 0.09% at 104.47 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 103.98 (monthly low November 14) ahead of 103.61 (200-day SMA) and 102.93 (weekly low August 30).