USD Index flirts with the 200-day SMA near 103.70

• The index looks offered around 103.70 on Monday.
• Speculation remains on the rise around potential Fed rate cuts in March.
• The US CB Leading Index will be the sole release in the docket.

The greenback, when gauged by the USD Index (DXY), maintains the bearish tone and flirts with the key 200-day SMA in the 103.70/60 band on Monday.

USD Index remains under pressure below 104.00

The selling bias remains well in place around the index, which navigates in levels last seen in early September and threatens to break below the critical 200-day SMA at the beginning of the week.

In addition, the marginal movement in the dollar coincides with a so-far directionless theme in US yields across different maturities, always against the backdrop of rising speculation that the Federal Reserve might start reducing its interest rate as soon as in March 2024.

Data wise in the US, the only release will be the CB Leading Index in a shortened week due to the Thanksgiving Day holiday (Thursday).

What to look for around USD

In the meantime, the downward bias maintains its dominance on the greenback and forces the index to put the key 200-day SMA to the test on Monday.

Furthermore, 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.

Some support for 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:  CB Leading Index (Monday) – Chicago Fed National Activity Index, Existing Home Sales, FOMC Minutes Tuesday) – MBA Mortgage Applications, Durable Goods Orders, Initial Jobless Claims, Final Michigan Consumer Sentiment (Wednesday) – S&P Global Flash Manufacturing/ Services PMIs (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 down 0.07% at 103.73 and faces immediate contention at 103.53 (monthly low November 20) ahead of 102.93 (weekly low August 30) and then the psychological 100.00 threshold. On the upside, 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).