• The index alternates gains with losses near 106.00.
• Chief Powell remained cautious at his speech on Thursday.
• The flash Consumer Sentiment gauge takes centre stage later.

The greenback looks to extend its strong weekly recovery and already flirts with the key barrier at 106.00 the figure when measured by the USD Index (DXY) on Friday.

USD Index retargets 106.00 near term

The index keeps pushing harder and extends its weekly bounce to the boundaries of the 106.00 hurdle.

In fact, the upbeat mood in the dollar appears bolstered by Thursday’s prudent tone from Chief Powell at his Q&A session.

Indeed, Chair Powell indicated that the Federal Reserve is not eager to raise its benchmark interest rate further, citing evidence of a gradual easing of inflation pressures. While participating in a panel discussion, he refrained from dismissing the possibility of another rate hike to aid in bringing inflation down to the Fed's target level of 2%. In addition, Powell asserted that there is a lack of confidence in the belief that the Fed’s benchmark rate is sufficiently elevated to consistently bring inflation down to 2%.

Later in the US docket, the release of the preliminary Michigan Consumer Sentiment for the month of November will take centre stage along with speeches by Dallas Fed L. Logan (voter, hawk) and Atlanta Fed R. Bostic (2024 voter, centrist).

What to look for around USD

The index seems to be struggling to surpass the 106.00 barrier so far at the end of the week, all amidst the multi-session recovery sparked following lows in the sub-105.00 region (November 6).

In the meantime, the dollar loses some composure despite the broad-based good health of the US economy and the inflation still running above the Fed’s target, while further cooling of the US labour market now appear to underpin a protracted impasse in the Fed’s current restrictive stance.

Key events in the US this week: Flash Michigan Consumer Sentiment (Friday).

Eminent issues on the back boiler: Persistent debate over a soft or hard landing for the US economy. Speculation of rate cuts in early 2024. Geopolitical effervescence vs. Russia and China. Potential spread of the Middle East crisis to other regions.

USD Index relevant levels

Now, the index is up 0.01% at 105.90 and the breakout of 106.88 (weekly high October 26) could expose 107.34 (2023 high October 3) and finally 107.99 (weekly high November 21 2022). On the other hand, initial support is seen at 104.84 (monthly low November 6) ahead of 104.42 (weekly low September 11) and then 103.59 (200-day SMA).