USD Index faces some pressure around 102.80 ahead of PCE

• The index trades slightly on the defensive near 102.80.
• US yields look to rebound from recent multi-week lows.
• PCE, Core PCE take centre stage later in the NA session.

The greenback appears under some selling pressure and gyrates around the 102.80 region when measured by the USD Index (DXY) on Thursday.

USD Index focuses on key data

The index now faces some headwinds following Wednesday’s decent rebound from three-month lows near 102.40.

The ongoing three-week retracement in the dollar has been magnified in response to increasing speculation of interest rate cuts by the Federal Reserve at some point in the spring of 2024, a view that seems to still be contested by some Fed rate setters.

Later in the NA session, all the attention is expected to be on the release of US inflation figures tracked by the PCE and Core PCE, seconded by usual weekly Initial Claims, Personal Income, Personal Spending and Pending Home Sales.

What to look for around USD

The index managed to regain some balance after bottoming out in three-week lows near 102.40 earlier in the week.

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: 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 0.09% at 102.74 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 103.58 (200-day SMA) would open the door to 104.21 (weekly high November 22) and then 105.47 (55-day SMA).