• The index extends the march north and targets 105.00.
• Usual weekly Initial Claims next on tap in the docket.
• Fed’s Harker, Williams, Bostic and Bowman speak later.

The USD Index (DXY), which tracks the greenback vs. a bundle of its main competitors, keeps the buying pressure well in place and approaches the 105.00 region on Thursday.

USD Index shifts the attention to Fedspeak

The index advances for the third session in a row so far on Thursday, always helped by the equally strong move higher in US yields seen in past days.

The recent price action around the dollar also comes amidst increasing market chatter surrounding the Federal Reserve and the probability that it might start cutting rates at some point in Q2 2024.

In addition, according to CME Group’s FedWatch Tool, investors see the Fed keeping rates unchanged for the remainder of the year, although a rate hike in November appears not fully ruled out in light of the persistent upside surprises in the US docket.

Later in the session, the only release of note will be the usual weekly Initial Claims seconded by speeches by Philly Fed P. Harker (voter, hawk), NY Fed J. Williams (permanent voter, centrist), Atlanta Fed R. Bostic (2024 voter, hawk) and FOMC Governor M. Bowman (permanent voter, centrist).

What to look for around USD

The recent strong recovery in the index has opened the door to a potential visit to the 105.00 region sooner rather than later.

In the meantime, support for the dollar keeps coming from the good health of the US economy, which seems to have reignited the narrative around the tighter-for-longer stance from the Federal Reserve.

Running on the opposite side of the road, the idea that the dollar could face headwinds in response to the data-dependent stance from the Fed against the current backdrop of persistent disinflation and cooling of the labour market appears to have regained some traction as of late.

Key events in the US this week: Initial Jobless Claims (Thursday) – Wholesale Inventories, Consumer Credit Change (Friday).

Eminent issues on the back boiler: Persistent debate over a soft or hard landing for the US economy. Incipient speculation of rate cuts in H1 2024. Geopolitical effervescence vs. Russia and China.

USD Index relevant levels

Now, the index is advancing 0.07% at 104.91 and faces the next up barrier at 105.02 (monthly high September 6) ahead of 105.88 (2023 high March 8) and finally 106.00 (round level). On the downside, the breach of 103.02 (200-day SMA) would open the door to 102.93 (weekly low August 30) and then 102.56 (55-day SMA).