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US Dollar Index looks cautious around 106.50 before data, Fed

  • The index extends the number bound theme in the mid-106.00s.
  • US yields also appear side-lined before he upcoming Fed event.
  • Consumer Confidence, housing data next on tap in america docket.

The greenback, in term of the US Dollar Index (DXY), extends its consolidative mood round the 106.50 region on turnaround Tuesday.

US Dollar Index now looks to data before FOMC

The index sheds ground for the fourth consecutive session up to now on Tuesday, though it appears well supported by the 106.00 neighbourhood amidst prevailing cautiousness prior to the key FOMC gathering on Wednesday.

Indeed, the Federal Reserve begins its 2-day meeting on Tuesday and is likely to announce a 75 bps interest hike on Wednesday. The likelihood of such outcome is currently nearly 73% in accordance with CME Groups FedWatch Tool.

For the time being, the dollar appears inside a consolidative phase prior to the release of the always relevant Consumer Confidence tracked by the Conference Board, New Home Sales and the FHFAs House Price Index.

What things to search for around USD

The index came under downside pressure following nearly 20-year highs north of the 109.00 mark in mid-July, though it appears to have met some decent support near 106.00 for the moment.

Up to now, the dollar remains underpinned by the Feds divergence vs. the majority of its G10 peers (especially the ECB) in conjunction with bouts of geopolitical effervescence and the re-emergence of the chance aversion among investors.

On the other hand, market chatter of a potential US recession could temporarily undermine the uptrend trajectory of the dollar somewhat.

Key events in america this week: House Price Index, CB Consumer Confidence, New Home Sales (Tuesday) MBA. Mortgage Applications, Durable Goods Orders, Advanced Goods Trade Balance, Pending Home Sales, Fed INTEREST Decision, Powell Press Conference (Wednesday) Flash Q2 GDP, Initial Claims (Thursday) PCE Price Index, Personal Income, Personal Spending, Final Michigan Consumer Sentiment (Friday).

Eminent issues on the trunk boiler: Hard/soft/softish? landing of the united states economy. Escalating geopolitical effervescence vs. Russia and China. Feds more aggressive rate path this season and 2023. US-China trade conflict. Future of Bidens Build Back Better plan.

US Dollar Index relevant levels

Now, the index is down 0.09% at 106.39 and faces initial support at 106.11 (weekly low July 22) accompanied by 103.67 (weekly low June 27) and lastly 103.41 (weekly low June 16). However, a rest above 109.29 (2022 high July 15) would expose 109.77 (monthly high September 2002) and 110.00 (round level).

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