• The index keeps the erratic performance unchanged this week.
• US yields extend the rally across the curve on Wednesday.
• The ISM Manufacturing will take centre stage later in the NA session.

The USD Index (DXY), which gauges the greenback vs. a basket of its main rival currencies, trades on the defensive well south of the 105.00 yardstick on Wednesday.

USD Index now looks at key data

The index fades Tuesday’s uptick and returns to the negative territory following an earlier failed attempt to retake the area above the 105.00 barrier.

The dollar, in the meantime, keeps the choppiness well in place so far this week against the usual backdrop of persistent speculation over the potential next steps by the Federal Reserve and the current resilience of the US economy.

Later in the US data space, all the attention will be on the release of the ISM Manufacturing for the month of February along with Construction Spending, the final Manufacturing PMI and weekly Mortgage Applications.

What to look for around USD

The index loses the grip and return to the sub-105.00 region ahead of key results in the US docket midweek.

The probable pivot/impasse in the Fed’s normalization process narrative is expected to remain in the centre of the debate along with the hawkish message from Fed speakers, all after US inflation figures for the month of January showed consumer prices are still elevated, the labour market remains tight and the economy maintains its resilience.

The loss of traction in wage inflation – as per the latest US jobs report - however, seems to lend some support to the view that the Fed’s tightening cycle have started to impact on the still robust US labour markets somewhat.

Key events in the US this week: MBA Mortgage Approvals, Final Manufacturing PMI, ISM Manufacturing, Construction Spending (Wednesday) – Initial Jobless Claims (Thursday) – Final Services PMI, ISM Non-Manufacturing (Friday).

Eminent issues on the back boiler: Rising conviction of a soft landing of the US economy. Persistent narrative for a Fed’s tighter-for-longer stance. Terminal rates near 5.5%? Fed’s pivot. Geopolitical effervescence vs. Russia and China. US-China trade conflict.

USD Index relevant levels

Now, the index is retreating 0.28% at 104.65 and the breach of 103.45 (55-day SMA) would open the door to 102.58 (weekly low February 14) and finally 100.82 (2023 low February 2). On the other hand, the next up barrier aligns at 105.35 (monthly high February 27) seconded by 105.63 (2023 high January 6) and then 106.51 (200-day SMA).