USD Index regains the smile near 103.50

• The index advances slightly around the 102.50/60 band.
• US yields trade without clear direction so far on Wednesday.
• Weekly Mortgage Applications, Pending Home Sales next on tap.

The greenback, in terms of the USD Index (DXY), regains some composure and revisits the 102.50/60 area on Wednesday.

USD Index looks at risk trends, banking sector

The current bullish attempt comes after two consecutive daily declines and on the back of the tepid knee-jerk in the risk complex as well as the lack of direction surrounding US yields.

In the meantime, banking concerns appear far from abated and somewhat underpin the better tone in the dollar via a firmer demand for the safe haven universe.

On the negative side for the buck, the likelihood that the Federal Reserve might pause its tightening stance at the May gathering continues to weigh on the currency, at the time when the probability of this scenario hovers around 60% according to CME Group’s FedWatch Tool.

In the US data space, weekly MBA Mortgage Applications are due seconded by Pending Home Sales and the weekly report on US crude oil inventories by the EIA.

What to look for around USD

The index picks up some pace and retakes the mid-102.00s amidst some correction in the risk complex on Wednesday.

So far, speculation of a potential Fed’s pivot in the short-term horizon should keep weighing on the dollar, although the still elevated inflation, the resilience of the US economy and the hawkish narrative from Fed speakers are all seen playing against that view for the time being.

Key events in the US this week: MBA Mortgage Applications, Pending Home Sales (Wednesday) – Final Q4 GDP Growth Rate, Initial Jobless Claims (Thursday) – PCE, Personal Income/Spending, Final Michigan Consumer Sentiment (Friday).

Eminent issues on the back boiler: Persistent debate over a soft/hard landing of the US economy. Terminal Interest rate near the peak vs. speculation of rate cuts in 2024. Fed’s pivot. Geopolitical effervescence vs. Russia and China. US-China trade conflict.

USD Index relevant levels

Now, the index is advancing 0.17% at 102.59 and faces the next resistance level at 103.36 (55-day SMA) followed by 104.15 (100-day SMA) and then 105.88 (2023 high March 8). On the other hand, the breach of 101.93 (monthly low March 23) would open the door to 100.82 (2023 low February 2) and finally 100.00 (psychological level).