USD Index treads water around the 103.50 region

• The index trades close to the area of recent tops.
• US yields correct lower across the curve.
• The US calendar is empty on Friday.

The greenback gyrates around the 103.50 region when tracked by the USD Index (DXY) at the end of the week.

USD Index meets resistance near 103.60

The index so far alternates gains with losses in the upper end of the recent range and trades close to recent multi-week peaks around 103.60.

The dollar’s price action comes amidst some loss of momentum in the appetite for risk-associated assets, while US yields correct lower from recent tops. It is worth noting that the dollar’s strong advance in past weeks has been underpinned by an equally robust rebound in US yields, which in turn reinforced increasing speculation that the Federal Reserve might keep its restrictive monetary stance for longer than initially expected.

There will be no data releases scheduled on the US calendar on Friday.

What to look for around USD

The index maintains the trade near recent peaks in a context dominated by higher US yields and vacillating trends in the risk-linked galaxy.

Extra support for the dollar also comes from the good health of the US economy, which seems to have reignited the narrative around the tighter-for-longer stance from the Federal Reserve.

Furthermore, the idea that the dollar could face headwinds in response to the data-dependent stance from the Fed against the current backdrop of persistent disinflation and cooling of the labour market appears to be losing traction as of late.

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 down 0.03% at 103.39 and faces immediate support at 102.33 (55-day SMA) seconded by 101.74 (monthly low August 4) and then 100.55 (weekly low July 27). On the other hand, the breakout of 103.59 (monthly high August 17) would open the door to 104.69 (monthly high May 31) and finally 105.88 (2023 high March 8).