USD Index climbs to 2-week highs past 101.00

• The index extends its upside momentum above 101.00.
• Softer-than-expected PMIs hurt the euro on Monday.
• Flash PMIs, Chicago Fed National Activity Index next on tap.

The greenback, in terms of the USD Index (DXY), extends the recovery further north of 101.00 the figure at the beginning of the week.

USD Index looks at data, FOMC

The index trades with gains for the fifth consecutive session so far on Monday and looks to consolidate the recent breakout of the key 101.00 hurdle on the back of further selling pressure in the risk complex.

On the latter, poor advanced PMI prints in the euro area hurt the sentiment among the risky assets and lends extra legs to the greenback at the beginning of the week amidst the continuation of the lack of traction in US yields across all maturities.

Looking at the macro scenario, the Federal Reserve meets later in the week and is expected to hike rates by 25 bps. However, investors’ attention is expected to be on the next steps by the central bank regarding its normalization programme vs, markets’ perception that the July rate raise could be the last one.

Data-wise across the pond, the Chicago Fed National Activity Index is due along with flash Manufacturing and Services PMIs for the month of July.

What to look for around USD

The index extends the optimism north of the 101.00 hurdle amidst further bearishness surrounding the risk-associated universe on Monday.

In the near term, there are no changes to the perception that the Fed would resume its tightening process later in the month despite persistent disinflationary pressures and the still tight labour market.

This view was further bolstered by comments from Fed Chief Powell at the June FOMC event, who referred to the July meeting as "live" and indicated that most of the Committee is prepared to resume the tightening campaign as early as next month.

Key events in the US this week: Chicago Fed National Activity Index, Flash Manufacturing, Services PMI (Monday) – FHFA House Price Index, CB Consumer Confidence (Tuesday) – MBA Mortgage Applications, New Home Sales, Fed Interest Rate Decision (Wednesday) – Durable Goods Orders, Advanced Q2 GDP Growth Rate, Initial Jobless Claims, Flash Goods Trade Balance, Pending Home Sales (Thursday) – PCE, Core PCE, 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 late 2023/early 2024. Geopolitical effervescence vs. Russia and China. US-China trade conflict.

USD Index relevant levels

Now, the index is up 0.21% at 101.30 and the breakout of 102.61 (55-dat SMA) would open the door to 103.54 (weekly high June 30) and then 104.00 (200-day SMA). On the downside, immediate support emerges at 99.57 (2023 low July 13) followed by 97.68 (weekly low March 30) and 95.17 (monthly low February 10 2022).