US Dollar Index: DXY bulls take a breather around 103.00 with eyed on Fed Chair Powell’s speech

• US Dollar Index seesaws around weekly top, licks its wounds after snapping two-day losing streak.
• Hawkish central bankers, upbeat US Banking Stress Test and the increasing odds of US-China tussle propel DXY.
• Cautious mood ahead of Fed Chair Powell’s speech allow consolidation of the US Dollar Index gains.
• Fed’s Powell needs to defend higher rates to keep the DXY buyers in driver’s seat.

US Dollar Index (DXY) remains on the front foot around 103.00, poking the weekly high after snapping a two-day downtrend the previous day, despite the early Asian session inactivity on Thursday. In doing so, the DXY cheers hawkish central bankers’ comments, as well as headlines surrounding the US-China ties and cautious mood ahead of Fed Chair Jerome Powell’s speech in Madrid.

That said, a slew of central bankers defended restrictive monetary policies in their latest speeches at the European Central Bank (ECB) Forum on central banking in Sintra.

Among them, Federal Reserve (Fed) Chairman Jerome Powell gains major attention as he reiterated support for two rate hikes while ruling out the economic downturn as the most likely case. On the same line, ECB President Lagarde stated that they still have ground to cover and also added, “If the baseline stands, we know we will likely hike again in July.” Further, Bank of England (BoE) Govern Andrew Bailey showed readiness to do what is necessary to get inflation to target.

Alternatively, Bank of Japan (BoJ) Governor Kazuo Ueda appeared as an exception at the ECB Forum on central banking as the policymaker defended the dovish bias while saying, “(There is) still some distance to go in sustainably achieving 2% inflation accompanied by sufficient wage growth.”

Additionally, fears of the US-China tension and challenges for the ECB hawks, amid recession woes and mixed bias of the policymakers at home, also facilitate the US Dollar Index strength. That said, ECB policymaker Mario Centeno and US Treasury Secretary Janet Yellen recently offered more clues to favor the Gold bears but failed to gain major attention. ECB’s Centeno said, per Reuters “We are reaching the time when monetary policy may pause”. On the other hand, US Treasury Secretary Yellen recently flagged mixed concerns about the US-China ties by suggesting a visit to Beijing but showed readiness to defend US interests.

Elsewhere, the upbeat outcome of the US Banking Stress Test adds strength to the bearish bias surrounding the DXY. “The Fed's ‘stress test’ exercise showed lenders, including JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Morgan Stanley and Goldman Sachs, have enough capital to weather a severe economic slump, paving the way for them to issue share buybacks and dividends,” reported Reuters.

Amid these plays, S&P500 Futures print mild gains even after Wall Street closed mixed and yields remained sidelined after falling the previous day.

Looking ahead, today’s speech of Federal Reserve Chairman Jerome Powell in Madrid, as well as the US Weekly Initial Jobless Claims and Germany’s preliminary inflation data for June, will be eyed closely for clear directions of the US Dollar Index.

Technical analysis

Although a clear upside break of the one-month-old descending resistance line, now immediate support near 102.80, keeps the US Dollar Index (DXY) buyers hopeful, a daily closing past the 100-DMA hurdle of around 103.10 becomes necessary to defend the bullish bias.