- The index gives away some gains following Tuesday’s strong uptick.
- The risk aversion looks somewhat mitigated early on Wednesday.
- Durable Goods Orders, Trade Balance next of note in the docket.
The greenback trades with marginal losses near the 101.80 region when tracked by the USD Index (DXY) ahead of the opening bell in Europe on Wednesday.
USD Index remains capped by 102.00
The index faces a knee-jerk following Tuesday’s pronounced pullback amidst diminishing risk aversion and some improvement in the risk-linked galaxy.
No news from the macro scenario, where the recent resurgence of banking jitters sponsored the return of the risk aversion on Tuesday and propelled the index to the proximity of the 102.00 region.
In the meantime, investors continue to favour a 25 bps rate hike by the Fed at the May 3 event, although the probability of that outcome shrinks a tad to around 75% (from nearly 90% a day ago).
In the docket, Durable Goods Orders will take centre stage later in the session seconded by MBA Mortgage Applications and Advanced Goods Trade Balance.
What to look for around USD
The dollar’s recovery meets some initial resistance near the 102.00 hurdle so far this week.
Looking at the broader picture, the index continues to navigate in a consolidative phase against steady expectations of another rate increase in May by the Fed.
In favour of a pivot in the Fed’s hiking cycle following the May event appears the persevering disinflation and nascent weakness in some key fundamentals.
Key events in the US this week: MBA Mortgage Applications, Durable Goods Orders, Advanced Goods Trade Balance (Wednesday) – Flash Q1 GDP Growth Rate, Initial Jobless Claims, Pending Home Sales (Thursday) – PCE/Core PCE, Employment Cost, Personal Income, Personal 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 2024. Fed’s pivot. Geopolitical effervescence vs. Russia and China. US-China trade conflict.
USD Index relevant levels
Now, the index is losing 0.09% at 101.75 and the breach of 100.78 (2023 low April 14) would open the door to 100.00 (psychological level) and finally 99.81 (weekly low April 21 2022). On the other hand, the next hurdle emerges at 102.80 (weekly high April 10) followed by 103.05 (monthly high April 3) and then 103.21 (55-day SMA).