USD Index looks slightly bid above 106.00, looks at Fedspeak, geopolitics

• The index reverses an initial drop to 105.90.
• The NFIB index, Wholesale Inventories are next on tap in the docket.
• Fedspeak will take centre stage later in the NA session.

The greenback, in terms of the USD Index (DXY), navigates a tight range just above the 106.00 hurdle on turnaround Tuesday.

USD Index looks at risk trends, Fedspeak

The index so far reverses four sessions in a row of losses and hovers around the 106.00 region on the back of a cautious trade among market participants in light of geopolitical concerns and ahead of the release of US inflation figures (October 12).

In the meantime, the US bonds market resumes its activity following Monday’s Columbus Day holiday, with yields attempting a modest rebound so far on Tuesday.

On the monetary policy front, investors continue to factor in the likelihood that the Federal Reserve might keep its restrictive stance for longer than anticipated, although the perception of a potential rate hike before year-end seems to have lost traction as of late.

In the docket, the NFIB Business Optimism Index is due in the first turn seconded by Wholesale Inventories along with speeches by Atlanta Fed Raphael Bostic (2024 voter, hawk), FOMC Governor Christopher Waller (permanent voter, hawk) and Minneapolis Fed Neal Kashkari (voter, centrist).

What to look for around USD

The index attempts a rebound after briefly piercing the key 106.00 support earlier on Tuesday’s session.

In the meantime, support for the dollar keeps coming from the good health of the US economy, which at the same time appears underpinned by the renewed tighter-for-longer stance narrative from the Federal Reserve.

Key events in the US this week: NFIB Business Optimism Index, Wholesale Inventories (Tuesday) – MBA Mortgage Applications, Producer Prices, FOMC Minutes (Wednesday) - Initial Jobless Claims, Inflation Rate (Thursday) – Flash Consumer (Friday).

Eminent issues on the back boiler: Persevering 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 up 0.11% at 106.17 and a breakout of 107.34 (2023 high October 3) would open the door to 107.99 (weekly high November 21 2022) and finally 110.99 (high November 10 2022). On the downside, the next support emerges at 105.65 (low September 29) ahead of 104.42 (weekly low September 11) and then 103.18 (200-day SMA).