USD Index regains the smile around the 112.00 region

• The index looks to reclaim some ground lost around 112.00.
• US yields start the week on the defensive across the curve.
• Flash PMIs, Chicago Fed index next on tap in the US docket.

The greenback kickstarts the week in an auspicious note and pushes the USD Index (DXY) back above the 112.00 barrier on Monday.

USD Index focuses on data, risk trends

The index gathers upside traction and prints decent gains in the European morning, reclaiming the 112.00 neighbourhood amidst some loss of momentum in the risk complex and following two daily drops in a row.

The bullish attempt in the dollar comes on the back of a corrective downtick in US yields across the curve, which give away part of last week’s climb to fresh cycle highs and remain propped up by prospects for the continuation of the tightening bias from the Federal Reserve in the next months.

Data wise in the US docket, the Chicago Fed National Activity Index is due seconded by flash Manufacturing and Services PMIs for the current month.

What to look for around USD

The dollar pokes once again with the 112.00 region and manages to reverse part of the weakness seen in the last part of last week.

In the meantime, the firmer conviction of the Federal Reserve to keep hiking rates until inflation looks well under control regardless of a likely slowdown in the economic activity and some loss of momentum in the labour market continues to prop up the underlying positive tone in the index.

Looking at the more macro scenario, the greenback also appears bolstered by the Fed’s divergence vs. most of its G10 peers in combination with bouts of geopolitical effervescence and occasional re-emergence of risk aversion.

Key events in the US this week: Chicago fed National Activity Index, Advanced Manufacturing/Services PMIs (Monday) – FHFA House Price Index, CB Consumer Confidence (Tuesday) – MBA Mortgage Applications, New Home Sales, Building Permits, Advanced Goods Trade Balance (Wednesday) – Flash Q3 GDP Growth Rate, Durable Goods Orders (Thursday) – PCE/Core PCE Price Index, Personal Income/Spending, Pending Home Sales, Final Michigan Consumer Sentiment (Friday).

Eminent issues on the back boiler: Hard/soft/softish? landing of the US economy. Prospects for further rate hikes by the Federal Reserve vs. speculation of a recession in the next months. Geopolitical effervescence vs. Russia and China. US-China persistent trade conflict.

USD Index relevant levels

Now, the index is gaining 0.19% at 112.08 and faces the next up barrier at 113.88 (monthly high October 13) followed by 114.76 (2022 high September 28) and then 115.32 (May 2002 high). On the other hand, the breakdown of 110.05 (weekly low October 4) would open the door to 109.35 (weekly low September 20) and finally 107.68 (monthly low September 13).