• The index abandons the area of recent peaks above 104.00.
• Expectations of interest rate cuts by the Fed remain in place.
• US markets celebrate Thanksgiving Day on Thursday.

The greenback, in terms of the USD Index (DXY), now faces some selling pressure following Wednesday’s tops past 104.00 the figure.

USD Index meets some initial resistance around 104.20

Some selling bias kicks in around the greenback and forces the index to give away part of Wednesday’s uptick to the 104.20 zone, an area also coincident with the provisional 100-day SMA.

There is no news on the monetary policy front, where investors continue to see the Federal Reserve starting to reduce its interest rates at some point in the spring of 2024.

In addition, US markets will be closed due to the Thanksgiving Day holiday and this is expected to weigh on usual volatility and affect trading conditions.

What to look for around USD

So far, the rebound in the index seems to have met an initial obstacle around the 104.20 region.

Looking at the broader picture, the dollar appears depressed against the backdrop of rising speculation of probable interest rate cuts in H1 2024, all in response to further disinflationary pressures and the gradual cooling of the labour market.

Some support for the greenback, however, still emerges the resilience of the US economy as well as a persistent hawkish narrative from some Fed rate setters.

Key events in the US this week:  S&P Global Flash Manufacturing/ Services PMIs (Friday).

USD Index relevant levels

Now, the index is down 0.25% at 103.61 and faces immediate contention at 103.17 (monthly low November 21) ahead of 102.93 (weekly low August 30) and then the psychological 100.00 threshold. On the upside, the breakout of 104.21 (weekly high November 22) could expose a move to 106.00 (weekly high November 10) and finally 106.88 (weekly high October 26).