USD Index comes under pressure near 103.00 ahead of data, Fed

• The index gives away some gains around the 103.10 region.
• US yields recede from recent tops on Wednesday.
• FOMC Minutes, housing data take centre stage later in the day.

The greenback, when gauged by the USD Index (DXY), faces some downside pressure and retreats to the vicinity of the 103.00 neighbourhood on Wednesday.

USD Index focused on data, FOMC Minutes

The rally in the index appears to have met quite a decent barrier near six-week tops around the 103.50 region (August 14), an area reinforced by the vicinity of the key 200-day SMA (103.23).

In the meantime, the multi-week strong advance in the dollar remains underpinned by the equally robust move higher in US yields across different maturities, always amidst renewed speculation that the Fed might keep the current restrictive stance fir longer than initially anticipated.

Busy day ahead in the US calendar, where the publication of the FOMC Minutes will be in the limelight seconded by Housing Starts, Building, weekly Mortgage Applications and Industrial Production.

What to look for around USD

The index shows some exhaustion after hitting multi-week peaks near 103.50 earlier in the week and revisits the 103.00 zone ahead of key data releases on Wednesday.

In the meantime, resilient US fundamentals seem to have reignited the narrative around the tighter-for-longer stance from the Federal Reserve.

In fact, other than risk appetite trends, the dollar could face extra headwinds in response to the data-dependent stance from the Fed against the current backdrop of persistent disinflation and cooling of the labour market.

Key events in the US this week: MBA Mortgage Applications, Building Permits, Housing Starts, Industrial Production, FOMC Minutes (Wednesday) – Initial Jobless Claims, Philly Fed Manufacturing Index, CB Leading Index (Thursday).

Eminent issues on the back boiler: Persistent debate over a soft or hard landing for the US economy. Incipient speculation of rate cuts in early 2024. Geopolitical effervescence vs. Russia and China.

USD Index relevant levels

Now, the index is losing 0.15% at 103.04 and faces initial support at 102.33 (55-day SMA) followed by 101.74 (monthly low August 4) and then 100.55 (weekly low July 27). On the other hand, the breakout of 103.45 (monthly high August 14) would open the door to 103.57 (weekly high June 30) and finally 104.69 (monthly high May 31).