USD Index remains under pressure below the 102.00 mark

• The index starts the trading week on the defensive.
• The risk-on mood dominates the global markets on Monday.
• The CB Leading Index, short-term auctions next in the docket.

The greenback, in terms of the USD Index (DXY), adds to the ongoing weakness and extends the breach of the key 102.00 support on Monday.

USD Index navigates in multi-month lows

The index retreats for the third session in a row and trades in levels last seen back in early June 2022 amidst favourable risk appetite trends.

Indeed, the dollar loses further ground ahead of the opening bell in the old continent, while market participants continue to gauge the likelihood of further interest rate hikes by the Federal Reserve against a potential pivot in its monetary stance.

In the US docket, the CB Leading Index will be the sole release of note along with a 3-month/6-month bill auctions

What to look for around USD

The dollar’s price action remains subdued in the lower end of the recent range below the 102.00 mark at the beginning of the week.

The idea of a probable pivot in the Fed’s policy continues to weigh on the greenback and keeps the price action around the DXY depressed. This view, however, also comes in contrast to the hawkish message from the latest FOMC Minutes and recent comments from fed’s rate-setters, all pointing to the need to advance to a more restrictive stance and stay there for longer, at the time when rates are seen climbing above the 5.0% mark.

On the latter, the tight labour market and the resilience of the economy are also seen supportive of the firm message from the Federal Reserve and the continuation of its hiking cycle.

Key events in the US this week: CB Leading Index (Monday) – Flash Manufacturing/Services PMIs (Tuesday) – MBA Mortgage Applications (Wednesday) – Durable Goods Orders, Advanced Q4 GDP Growth Rate, Chicago Fed National Activity Index, Initial Jobless Claims, New Home Sales (Thursday) – PCE, Core PCE, Personal Income, Personal Spending, Pending Home Sales, Final Michigan Consumer Sentiment (Friday).

Eminent issues on the back boiler: Rising conviction of a soft landing of the US economy. Prospects for extra 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 trade conflict.

USD Index relevant levels

Now, the index is down 0.16% at 101.82 and the breakdown of 101.52 (monthly low January 18) would open the door to 101.29 (monthly low May 30) and finally 100.00 (psychological level). On the upside, the next barrier emerges at the weekly high at 102.89 (January 18) followed by 105.63 (monthly high January 6) and then 106.45 (200-day SMA).