The USD Index (DXY), which tracks the greenback vs. a bundle of its main rival currencies, managed to set aside part of the weekly bearish note and advance to the 102.70 region on Wednesday.

USD Index focused on Powell, risk trends

The index takes advantage of the prevailing risk off tone following the opening bell in the Euroland and reverses two straight sessions with losses on Wednesday.

The ongoing recovery in the US Dollar comes amidst inconclusive performance in the US money markets, where yields across the curve hover around Tuesday’s closing levels so far.

In the meantime, investors are expected to closely follow the participation of Chair J. Powell in a Policy Panel Discussion at the ECB Forum on Central Banking in Sintra (Portugal). It is worth noting that both the Federal Reserve and the European Central Bank are anticipated to hike their interest rates by 25 bps at their meetings in July.

In the US data space, usual weekly MBA Mortgage Applications are due in the first turn, seconded by flash Goods Trade Balance figures for the month of May.

What to look for around USD

The index manages to grab some breathing space and bounces off weekly lows in the  102.30 region (June 27).

Meanwhile, the likelihood of another 25 bps hike at the Fed's upcoming meeting in July remains high, supported by the continued strength of key US fundamentals such as employment and prices.

This view was further bolstered by comments from Fed Chief Powell at the June FOMC event, who referred to the July meeting as "live" and indicated that most of the Committee is prepared to resume the tightening campaign as early as next month.

Key events in the US this week: MBA Mortgage Applications, Advanced Goods Trade Balance, Fed Powell (Wednesday) – Final Q1 Growth Rate, Initial Jobless Claims (Thursday) – PCE, Core PCE, Personal Income/Spending, Final Michigan Consumer Sentiment (Friday).

Eminent issues on the back boiler: Persistent debate over a soft/hard landing of the US economy. Terminal Interest rate near the peak vs. speculation of rate cuts in late 2023/early 2024. Fed’s pivot. Geopolitical effervescence vs. Russia and China. US-China trade conflict.

USD Index relevant levels

Now, the index is up 0.08% at 102.58 and the breakout of 103.16 (weekly high June 23) would open the door to 104.69 (monthly high May 31) and then 104.99 (200-day SMA). On the other hand, the next contention emerges at 101.92 (monthly low June 16) followed by 100.78 (2023 low April 14) and finally 100.00 (round level).