USD Index appears offered around 102.00 ahead of US CPI, FOMC Minutes

• The index remains on the defensive and hovers around 102.00.
• Bets on a 25 bps rate raise by the Fed in May remain on the rise.
• US inflation figures tracked by the CPI will take centre stage.

The greenback, in terms of the USD Index (DXY), adds to Tuesday’s losses and keeps the trade around the 102.00 neighbourhood on Wednesday.

USD Index focuses on inflation

The index remains under pressure and continues to fade Monday’s uptick, this time putting the 102.00 zone to the test ahead of the publication of key US inflation figures for the month of March due later in the NA session.

In the meantime, US yields extend further the gradual recovery seen as of late against the backdrop of increasing speculation of another 25 bps rate hike by the Federal Reserve at the May 3 gathering.

Other than the release of the inflation readings, investors will closely follow the publication of the FOMC Minutes of the March meeting, while MBA Mortgage Applications will also complete the calendar on Wednesday.

What to look for around USD

Price action around the index shows some weakness and forces the dollar to retreat to the 102.00 zone on Wednesday, all in response to the rejection from Monday’s tops near 102.80.

The recent marked recovery in the dollar has been underpinned by the loss of momentum in the view that the Federal Reserve could make an impasse in its current tightening bias in May, which has been also propped up by persevering disinflation, nascent weakness in some key fundamentals and fresh concerns surrounding the banking sector

Key events in the US this week: MBA Mortgage Applications, Inflation Rate, Monthly Budget Statement, FOMC Minutes (Wednesday) – Producer Prices, Initial Jobless Claims (Thursday) – Retail Sales, Industrial Production, Advanced Michigan Consumer Sentiment, Business Inventories (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 retreating 0.09% at 102.04 and the breach of 101.43 (monthly low April 5) would open the door to 100.82 (2023 low February 2) and finally 100.00 (psychological level). On the other hand, the next resistance level emerges at 103.05 (monthly high April 3) seconded by 103.67 (100-day SMA) and then 105.11 (weekly high March 15).