USD Index keeps the bid bias unchanged near 103.00

• The index extends the weekly recovery around the 103.00 zone.
• The still unsolved debt ceiling remains in centre stage.
• Weekly Claims, Philly Fed index, Fedspeak next on tap.

The USD Index (DXY), which tracks the greenback vs. a basket of its main competitors, keeps the buying interest well and sound near the 103.00 region on Thursday.

USD Index looks at data, debt ceiling

The index so far advances for the third session in a row on the back of persistent uncertainty surrounding the debt ceiling discussion despite the spark of optimism around the issue emerged on Wednesday.

The current march north in the index comes pari passu with further upside in US yields across the curve, where the short end regained the area above the key 4.0% threshold to return to levels last seen in mid-April.

In the US data space, usual weekly Claims are due seconded by the Philly Fed Manufacturing gauge, Existing Home Sales and the CB Leading Index. In addition, FOMC’s P. Jefferson (permanent voter, centrist) and Dallas Fed L. Logan (voter, centrist) are due to speak along with the testimony by FOMC’s M. Barr (permanent voter, centrist) before the US Senate.

What to look for around USD

The index keeps the optimism well in place for yet another session and looks to consolidate the recent breakout of the 103.00 barrier.

The index manages well to leave behind the recent multi-week consolidation theme, setting aside at the same time initial weakness following the recent indication that the Fed will probably pause its normalization process in the near future. That said, the future direction of monetary policy will be determined by the performance of key fundamentals (employment and prices mainly).

Favouring an impasse by the Fed appears the persevering disinflation – despite consumer prices remain well above the target – incipient cracks in the labour market, the loss of momentum in the economy and persevering uncertainty surrounding the US banking sector.

Key events in the US this week: MBA Mortgage Applications, Building Permits, Housing Starts (Wednesday) – Philly Fed Index, Initial Jobless Claims, CB Leading Index, Existing Home Sales (Thursday) – Fed J. Powel (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 late 20223. Fed’s pivot. Geopolitical effervescence vs. Russia and China. US-China trade conflict.

USD Index relevant levels

Now, the index is up 0.10% at 102.96 and the break above 103.11 (monthly high May 17) could open the door to 105.79 (200-day SMA) and then 105.88 (2023 high March 8). On the downside, the next support emerges at 101.01 (weekly low April 26) prior to 100.78 (2023 low April 14) and finally 100.00 (psychological level).