USD Index appears side-lined near 103.70, looks at PMIs

• The index extends the consolidative theme near 103.70.
• Low volatility should persist following the Thanksgiving Day holiday.
• Advanced Manufacturing and Services PMIs are next on tap.

The USD Index (DXY), which gauges the greenback vs. a bundle of its main competitors, extends the weekly consolidative mood below the 104.00 hurdle on Friday.

USD Index remains capped by the 104.20 zone

The index alternates gains with losses near the 103.70 region amidst a generalized scarce volatility and marginal trading conditions, as markets shrug off Thursday’s US holiday and walk into a shortened session on Friday.

For now, there are no updates regarding monetary policy, while investors maintain their anticipation of the Federal Reserve initiating interest rate reductions around spring 2024.

Later in the NA session, the only release of note will be the preliminary readings of the Manufacturing and Services PMIs for the month of November.

What to look for around USD

In line with the broad mood prevailing among traders, the index navigates within a range bound theme near the key 200-day SMA (103.61), while bullish attempts still limited just above the 104.00 hurdle.

Looking at the broader picture, 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 persistent hawkish narrative from some Fed rate setters.

Key events in the US this week:  S&P Global Flash Manufacturing/ Services PMIs (Friday).

USD Index relevant levels

Now, the index is down 0.03% at 103.72 and faces immediate contention at 103.17 (monthly low November 21) ahead of 102.93 (weekly low August 30) and then the psychological 100.00 threshold. On the upside, the breakout of 104.21 (weekly high November 22) could expose a move to 106.00 (weekly high November 10) and finally 106.88 (weekly high October 26).