US Dollar Index resumes run-up towards 103.00 amid upbeat US data, hawkish Fed talks and debt limit drama

• US Dollar Index grinds higher after reversing week-start retreat from monthly top.
• US Retail Sales, Industrial Production offered positive surprise for April, Fed policymakers defend hawkish play.
• US President Biden, House Speaker McCarthy’s debt ceiling negotiations ended too soon, cited hopes of a deal by this weekend.
• Second-tier US housing data, risk catalysts eyed for clear directions.

US Dollar Index (DXY) seesaws around 102.60 amid early Wednesday, following a run-up to reverse the early week pullback from the highest levels in five weeks. With this, the greenback’s gauge versus six major currencies justify upbeat US data and hawkish Federal Reserve (Fed) comments while also making note of the latest positive development about the US debt ceiling issue.

US President Joe Biden and top congressional Republican Kevin McCarthy’s meeting ended within an hour and raised expectations of a positive development as congressional leaders, said, "It is possible to get a deal by the end of the week." Following the news, Reuters quotes the S&P Global Market Intelligence data while marking a fall in the one-year US Credit Default Swap (CDS) spreads from 164 basis points (bps) to 155 bps. “Spreads on five-year CDS decreased to 69 basis points from 72 bps on Monday,” reported the news.

That said, Federal Reserve Bank of Chicago President Austan Goolsbee and Atlanta Fed President Raphael Bostic recently defended the US central bank’s hawkish moves by citing inflation woes as they spoke at a conference hosted by the Federal Reserve Bank of Atlanta. Previously, Richmond Fed Thomas Barkin said in an interview with the Financial Times (FT) that if inflation persists, or God forbid accelerates, there’s no barrier in my mind to further increases in rates. On the same line, Cleveland Fed President Loretta Mester said, “I don’t think we're at that hold rate yet.”

It’s worth noting that US Retail Sales improved to 0.4% MoM for April, from -0.7% prior (revised) versus 0.7% expected. More importantly, Retail Sales Control Group for the said month crossed market forecasts of 0.0% and -0.4% prior with 0.7% actual figure whereas Retail Sales ex Autos matches 0.4% MoM estimations for April¸ surpassing the -0.5% prior. Further, the US Industrial Production MoM rose to 0.5% for April versus expectations of printing a 0.0% figure.

Amid these plays, the US Treasury bond yields remained firmer and Wall Street witnessed losses on Tuesday. However, the S&P500 Futures print mild gains by the press time.

Moving on, US Building Permits and Housing Starts for April will decorate today’s calendar and can entertain the DXY traders. However, major attention will be given to US debt ceiling updates and Fed talks for clear directions.

Technical analysis

Although 50-DMA puts a floor under the US Dollar Index (DXY) price near 102.35, a five-week-old horizontal resistance area around 102.75-80, followed by the 100-DMA hurdle of 102.90, can prod the bulls.