• The index extends the range bound theme around 102.30.
• US markets return to normal activity following Monday’s holiday.
• NY Empire State index, short-term auctions, Fedspeak next on tap.

The greenback, in terms of the USD Index (DXY), navigates under some downside pressure in the 102.30 region on turnaround Tuesday.

USD Index looks to data, Fedspeak

The index surrenders part of the auspicious start of the new trading week and returns to the 102.30 area on Tuesday, as US markets also return to their usual activity following Monday’s Martin Luther King Jr. Day holiday.

The renewed softer stance in the dollar comes on the back of the pick-up in the sentiment surrounding the risk complex, in particular following better-than-expected results from the Chinese fundamentals published earlier in the Asian trading hours.

In the US data space, the manufacturing gauge measured by the NY Empire State Index will be the sole data release and will be accompanied by short-term auctions and the speech by NY Fed J.Williams.

What to look for around USD

The dollar keeps navigating levels last seen in June 2022 around 103.30 pari passu with the resumption of the buying interest in the risk complex.

The idea of a probable pivot in the Fed’s policy in the next months continues to weigh on the greenback and keeps the price action around the DXY depressed. This view, however, also comes in contrast to the hawkish message from the latest FOMC Minutes and recent comments from fed’s rate-setters, all pointing to the need to advance to a more restrictive stance and stay there for longer, at the time when rates are seen climbing above the 5.0% mark.

On the latter, the tight labour market and the resilience of the economy are also seen supportive of the firm message from the Federal Reserve and the continuation of its hiking cycle.

Key events in the US this week: NY Empire State Manufacturing Index (Tuesday) – MBA Mortgage Applications, Producer Prices, Retail Sales, Industrial Production, NAHB Index, Business Inventories, Fed’s Beige Book, Net Long-term TIC Flows (Wednesday) – Building Permits, Housing Starts, Philly Fed Manufacturing Index, Initial Jobless Claims (Thursday) – Existing Home Sales (Friday).

Eminent issues on the back boiler: Rising conviction of a soft landing of the US economy. Prospects for extra rate hikes by the Federal Reserve vs. speculation of a recession in the next months. Fed’s pivot. Geopolitical effervescence vs. Russia and China. US-China trade conflict.

USD Index relevant levels

Now, the index is losing 0.23% at 102.31 and the breach of 101.77 (monthly low January 16) would open the door to 101.29 (monthly low May 30) and finally 100.00 (psychological level). On the other hand, the next hurdle emerges at 105.63 (monthly high January 6) followed by 106.41 (200-day SMA) and then 107.19 (weekly high November 30).