USD Index remains under pressure near 102.40 ahead of key data

• The index extends the breakdown of the 103.00 support.
• US yields drop to multi-week lows across the curve.
• Flash Q3 GDP figures, Fed’s Beige Book next on tap.

The USD Index (DXY), which tracks the greenback vs. a basket of its main rival currencies, keeps the bearish note unchanged in the mid-102.00s on Wednesday.

USD Index looks at key data, Fed

The index remains under pressure and maintains its offered stance firmly in place following the recent breach of the 103.00 support. Furthermore, the index continues to navigate its third consecutive week of losses and its worst month so far since November 2022.

Meanwhile, the perception that the Federal Reserve may begin reducing its interest rates at some point in the spring of 2024 remains steadily increasing despite consensus around this view still being elusive among some Fed policymakers.

On the US calendar, weekly Mortgage Applications tracked by MBA are due in the first turn seconded by advanced readings of the Q3 GDP Growth Rate, preliminary Goods Trade Balance and the Fed’s Beige Book.

Additionally, Cleveland Fed L. Mester (2024 voter, hawk) is also due to speak.

What to look for around USD

The index extends the leg lower and magnifies the recent breach of the 103.00 contention zone on Wednesday.

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: MBA Mortgage Applications, Q3 GDP Growth Rate, Goods Trade Balance, Fed Beige Book (Wednesday) – PCE, Core PCE, Initial Jobless Claims, Personal Income, Personal Spending, Pending Home Sales (Thursday) – Final S&P Global Manufacturing PMI, ISM Manufacturing PMI, Construction Spending, Fed’s Powell (Friday).

Eminent issues on the back boiler: Growing perception of a soft landing for the US economy. Speculation of rate cuts at some point in the spring of 2024. Omnipresent 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 0.11% at 102.65 and faces immediate contention at 102.46 (monthly low November 29) ahead of 101.74 (monthly low August 4) and then 100.51 (weekly low July 27). On the upside, the breakout of 103.59 (200-day SMA) would open the door to 104.21 (weekly high November 22) and then 105.51 (55-day SMA).