USD Index: Bears appear in control above 106.00 ahead of Powell

• The index drops to daily lows near 106.30 on Wednesday.
• Another revision saw GDP expand 2.9% YoY in Q3.
• Chair Powell will speak later in the NA session.

The greenback, when tracked by the USD index (DXY) remains on the defensive above the 106.00 hurdle in the wake of the opening bell in Wall Street on Wednesday.

USD Index now looks at Powell

The index surrenders part of the 3-day advance on the back of the improvement in the risk complex and ahead of the key speech by Chair Powell due later in the NA session.

In addition, the resumption of the downside pressure in the buck comes in tandem with another positive performance of US yields across the curve, which seem to have woken up and add to Tuesday’s gains.

In the US data space, MBA Mortgage Applications contracted 0.8% in the week to November 25 and the ADP Employment Change disappointed expectations after the US private sector created 127K jobs in November vs. 200K forecast. Further data saw the trade deficit widen to $99.0B in October and another revision of the Q3 GDP Growth Rate expect the economy to expand 2.9% YoY. Finally, the Chicago PMI eased to 37.2 in November, Pending Home Sales contracted 4.6% MoM in October and JOLTs Job Openings came at 10.334M in the same month. The Fed’s Beige Book will close the daily calendar later in the session.

Before Powell’s speech, FOMC Governor L.Cook will speak on “The Outlook for Monetary Policy and Observations on the Evolving Economy”.

What to look for around USD

The dollar loses part of the recent shine and returns to the 106.30 zone amidst prevailing cautiousness ahead of results from key fundamentals and the speech by Fed’s Powell.

While hawkish Fedspeak maintains the Fed’s pivot narrative in the freezer, upcoming results in US fundamentals would likely play a key role in determining the chances of a slower pace of the Fed’s normalization process in the short term.

Key events in the US this week: Mortgage Applications, ADP Employment Change, GDP Growth Rate, Goods Trade Balance, Pending Home Sales, Fed Powell, Fed Beige Book (Wednesday) - PCE, Initial Jobless Claims, Personal Income/Spending, Final Manufacturing PMI, ISM Manufacturing, Construction Spending (Thursday) - Nonfarm Payrolls, Unemployment Rate (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. Fed’s pivot. Geopolitical effervescence vs. Russia and China. US-China persistent trade conflict.

USD Index relevant levels

Now, the index is retreating 0.34% at 106.47 and the breakdown of 105.47 (200-day SMA) would open the door to 105.32 (weekly low November 28) and finally 104.63 (monthly low August 10). On the other hand, the immediate resistance emerges at 107.99 (weekly high November 21) followed by 109.11 (100-day SMA) and then 110.34 (55-day SMA).