USD Index makes a U-turn and retakes 102.00 and above

• The index bounces off the area of multi-month lows near 101.60.
• The resurgence of the risk-off sentiment props up the dollar.
• The CB Leading Index, short-term auctions come next in the session.

The USD Index (DXY), which tracks the greenback vs. a basket of its main rival currencies, manages to leave behind the earlier pessimism and reclaims the area beyond the 102.00 yardstick at the beginning of the week.

USD Index rebounds from the 101.60 region

The index attempts a moderate recovery and sets aside two consecutive daily pullbacks on the back of the re-emergence of the risk-off mood, while further gains in US yields also prop up the upside bias in the dollar on Monday

Indeed, US yields across the curve and the German 10-year benchmark extend the recent recovery and navigate the area of multi-day peaks.

Later in the NA session, the Conference Board will publish its Leading Index followed by 3-month/6-month bill auctions.

What to look for around USD

Dollar bears still find it difficult to break below the 102.00 support on a convincing fashion.

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 advances 0.20% at 102.19 and faces the next up barrier at the weekly high at 102.89 (January 18) seconded by 105.63 (monthly high January 6) and then 106.45 (200-day SMA). On the downside, the breach of 101.52 (2023 low January 18) would open the door to 101.29 (monthly low May 30 2022) and finally 100.00 (psychological level).