USD Index wobbles around 113.20 ahead of FOMC Minutes

• The index alternates gains with losses in the low-113.00s.
• The Fed will release its Minutes of the September meeting.
• Next on tap in the docket come Producer Prices, Mortgage Applications.

The USD Index (DXY), which tracks the greenback vs. a bundle of its main competitors trades without a clear direction in the 113.20/30 band on Wednesday.

USD Index looks to FOMC, data

The index seems to be under some mild pressure after five consecutive sessions with gains and with investors’ preference slightly tilted towards the risk complex in the European morning.

The lack of upside traction in the dollar is also accompanied by another downtick in US yields across the curve, as market participants wait for the publication of the FOMC Minutes for extra details on the Fed’s latest decision on interest rates.

Other than the FOMC Minutes, usual weekly MBA Mortgage Applications are due along with Producer Prices for the month of September.

What to look for around USD

The rally in the dollar appears to have met some decent hurdle in the 113.60 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: MBA Mortgage Applications, Producer Prices, FOMC Minutes (Wednesday) – Inflation Rate, Initial Jobless Claims (Thursday) – Retail Sales, Flash Michigan Consumer Sentiment, Business Inventories (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 down 0.02% at 113.26 and a breach 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). On the flip side, the next resistance lines up at 113.59 (monthly high October 12) followed by 114.76 (2022 high September 28) and then 115.32 (May 2002 high).