USD Index remains under pressure and drops to new 2023 lows

• The index deflates below the 100.80 mark, or new YTD lows.
• Markets continue to price in a potential pause by the Fed.
• Retail Sales, Industrial Production, Consumer Sentiment next on tap.

The greenback extends the weekly decline and prints new yearly lows in the 100.80/75 band when tracked by the USD Index (DXY) at the end of the week.

USD Index now looks at key data

The index extends the leg lower for the fourth consecutive session and remains under heavy pressure on Friday, always against the backdrop of the marked improvement in the risk-associated universe.

Despite market participants continue to favour a 25 bps rate hike by the Federal Reserve at the May gathering, the likelihood that the hiking cycle could be near its end seems to have boosted the optimism in the risk complex in detriment of the buck.

Later in the US data space, Retail Sales will take centre stage along with Industrial Production, the advanced Michigan Consumer Sentiment and Business Inventories.

What to look for around USD

The dollar remains on the back foot and keeps the price action around the index depressed, refocusing the attention at the same time to the psychological 100.00 mark in the near term.

The recent marked retracement in the dollar has been underpinned by the pick-up in the perception that the Federal Reserve could make a pause in its current tightening cycle just after the May meeting.

In favour of a pivot in the Fed’s normalization process, however, still emerges the persevering disinflation, nascent weakness in some key fundamentals and somewhat persistent concerns surrounding the banking sector.

Key events in the US this week: 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 0.12% at 100.88 and the breach of 100.78 (2023 low April 14) would open the door to 100.00 (psychological level) and finally 99.81 (weekly low April 21 2022). On the other hand, the next resistance level emerges at 103.05 (monthly high April 3) seconded by 103.57 (100-day SMA) and then 105.11 (weekly high March 15).