USD Index bounces off lows near 109.50 ahead of key US data

• The index attempts a mild recovery below 110.00 on Thursday.
• US yields regain some poise and trade with modest gains.
• Durable Goods Orders, Flash Q3 GDP, Initial Claims next on tap.

The greenback, when tracked by the USD Index (DXY), manages to gather some traction and rebounds from earlier lows near 109.50 on Thursday.

USD Index focuses on data, risk trends

Following two consecutive sessions with important losses, the index now reclaims part of the ground lost and approaches the key 110.00 barrier on Thursday.

The move higher in the dollar comes in response to a hiccup in the intense upside momentum in the risk-associated assets, which saw their upside magnified on the back of increasing speculation surrounding a potential Fed’s pivot.

In the US calendar, another revision of the Q3 GDP Growth Rate is due seconded by Durable Goods Orders and usual weekly Initial Claims.

In addition, the dollar is also expected to closely follow the ECB monetary policy meeting, where market consensus anticipates a 75 bps rate hike.

What to look for around USD

The dollar seems to have met some decent contention around the 109.50 region so far this 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: Flash Q3 GDP Growth Rate, Durable Goods Orders, Initial Claims (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 0.09% at 109.79 and faces the immediate up barrier at 113.88 (monthly high October 13) seconded by 114.76 (2022 high September 28) and then 115.32 (May 2002 high). On the flip side, the breakdown of 109.53 (monthly low October 27) would open the door to 109.35 (weekly low September 20) and finally 107.68 (monthly low September 13).