USD Index resumes the downside and breaks below 102.00

• The index prints fresh lows in the sub-102.00 region.
• Sentiment continues to favour the risk complex on Monday.
• Markets’ focus remains on a probable Fed’s pivot.

The greenback, in terms of the USD Index (DXY), loses further ground and trades in the area below the 102.00 support for the first time since early June.

USD Index under pressure in multi-month lows

The index starts the week in a soft note and extends the bearish mood for the fourth session in a row on Monday, this time revisiting the 101.80/75 band.

In the meantime, the dollar remains under persistent selling pressure, as investors continue to favour the risk-associated assets and the perception that the Federal Reserve could slow the pace of its future interest rate hikes keeps running high.

There will be no data releases in the US calendar on Monday, whereas the publication of the Philly Fed Manufacturing gauge, weekly Claims and Retail Sales should take centre stage later in the week.

What to look for around USD

The dollar retreats to levels last seen in June 2022 pari passu with the firmer pace in the risk complex.

The idea of a probable pivot in the Fed’s policy in the next months 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: NY Empire State Manufacturing Index (Tuesday) – MBA Mortgage Applications, Producer Prices, Retail Sales, Industrial Production, NAHB Index, Business Inventories, Fed’s Beige Book, Net Long-term TIC Flows (Wednesday) – Building Permits, Housing Starts, Philly Fed Manufacturing Index, Initial Jobless Claims (Thursday) – Existing Home Sales (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 losing 0.03% at 102.14 and the breach of 101.77 (monthly low January 16) would open the door to 101.29 (monthly low May 30) and finally 100.00 (psychological level). On the other hand, the next hurdle emerges at 105.63 (monthly high January 6) followed by 106.40 (200-day SMA) and then 107.19 (weekly high November 30).