USD Index retreats from recent peaks near 105.00, looks to data, FOMC Minutes

• The index sheds some ground after recent multi-day highs.
• The risk complex manages to regain some poise on Wednesday.
• Mortgage Applications, ISM Manufacturing, FOMC Minutes next on tap.

The greenback, when tracked by the USD Index (DXY), navigates the end of the Asian session slightly in the negative territory near 104.50 on Wednesday.

USD Index stays focused on the FOMC Minutes

The index gives away part of Tuesday’s strong advance to multi-session tops near the 105.00 hurdle on the back of the so far small improvement in the risk-associated universe on Wednesday.

The cautious note around the buck comes in line with investors’ prudence ahead of the release of the FOMC Minutes of the December 14 event later in the NA session. In the meantime, market participants continue to assess the potential next steps of the Federal Reserve amidst some loss of momentum in the domestic inflation and the upcoming publication of the December’s Nonfarm Payrolls (Friday).

In the meantime, US yields add to the weekly retracement across the curve and so far reverse two consecutive weeks with gains.

In the US data space, MBA Mortgage Applications are due in the first turn followed by the always relevant ISM Manufacturing PMI and the FOMC Minutes.

What to look for around USD

The dollar loses some traction after a strong start of the new year on Tuesday, when it climbed to the proximity of the 105.00 hurdle, or 2-week highs.

Meanwhile, the Fed’s pivot narrative remains in the freezer for the time being, although upcoming key 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 next months.

Key events in the US this week: MBA Mortgage Applications, ISM Manufacturing PMI, FOMC Minutes (Wednesday) – ADP Employment Change, Initial Jobless Claims, Balance of Trade, Final S&P Global Services PMI (Thursday) – Nonfarm Payrolls, Unemployment Rate, ISM Non-Manufacturing PMI, Factory Orders (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 trade conflict.

USD Index relevant levels

Now, the index is retreating 0.19% at 104.47 and the breakdown of 103.39 (monthly low December 30) would open the door to 101.29 (monthly low May 30) and finally 100.00 (psychological level). On the upside, the next hurdle comes at 104.85 (weekly high January 3) seconded by 105.82 (weekly high December 7) and then 106.25 (200-day SMA).