USD Index treads water around 101.30 ahead of key data

• The index alternates gains with losses near 101.30.
• US yields extend the decline early in the European morning.
• CB Consumer Confidence takes centre stage later in the NA session.

The USD Index (DXY), which tracks the greenback vs. a basket of its main competitors, navigates a narrow range around the 101.30 zone on turnaround Tuesday.

USD Index focuses on data

The index remains under pressure and the near-term outlook seems to point to the continuation of the downtrend with the initial support at the 101.00 mark ahead of the 2023 low near 100.80.

So far, investors seem convinced of another 25 bps rate hike by the Federal Reserve at its meeting on May 3 amidst hawkish Fedspeak and with inflation still way above the Fed’s 2.0% target.

Simultaneously, and also weighing on the buck and yields, emerges the speculation of a pause in the Fed’s hiking cycle soon after the May event.

In the US data space, the Consumer Confidence gauged by the Conference Board will grab all the attention later in the NA session seconded by the FHFA’s House Price Index and New Home Sales.

What to look for around USD

The dollar faces renewed downside pressure on the back of the improvement in the sentiment surrounding the risk-associated universe.

Looking at the broader picture, the index continues to navigate in a consolidative phase against steady expectations of another rate increase in May by the Fed.

In favour of a pivot in the Fed’s hiking cycle following the May event appears the persevering disinflation and nascent weakness in some key fundamentals.

Key events in the US this week: House Price Index, CB Consumer Confidence, New Home Sales (Tuesday) – MBA Mortgage Applications, Durable Goods Orders, Advanced Goods Trade Balance (Wednesday) – Flash Q1 GDP Growth Rate, Initial Jobless Claims, Pending Home Sales (Thursday) – PCE/Core PCE, Employment Cost, Personal Income, Personal 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 gaining 0.03% at 101.35 and faces the next hurdle at 102.80 (weekly high April 10) followed by 103.05 (monthly high April 3) and then 103.23 (55-day SMA). On the flip side, 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).