- The index extends the decline and flirts with 102.00.
- The US Dollar risks further weakness in the near term.
- Flash Consumer Sentiment, Bullard, Waller next on tap.
The greenback, when measured by the USD Index (DXY), maintains the offered stance and trades at shouting distance from the key support at 102.00 the figure at the end of the week.
USD Index weaker on firmer risk appetite
The index extends its negative streak for the fourth consecutive session on Friday, as the sentiment around the risk complex continues to improve and market participants keep adjusting to the hawkish message from the ECB event in the previous session.
Indeed, the index flirts with 6-week lows near 102.00 and risks a deeper pullback in the short-term horizon despite the so far small recovery in US yields across the curve and renewed speculation of a potential US recession.
In the US calendar, the only release of note will be the advanced print of the Consumer Sentiment for the month of June, along with speeches by St. Louis Fed J. Bullard (2025 voter, hawk) and FOMC’s C. Waller (permanent voter, hawk).
What to look for around USD
The index appears under heavy downside pressure, although it so far holds on just above the 102.00 region on Friday.
In the meantime, bets for another 25 bps rate hike at the Fed’s gathering in July remain well on the cards against the backdrop of the steady resilience of key US fundamentals (employment and prices, mainly).
The above-mentioned scenario was also reinforced by Chief Powell on Wednesday after he deemed the July meeting “live”, while the majority of the Committee seems ready to resume the tightening campaign as soon as next month.
Key events in the US this week: IFlash 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 gaining 0.05% at 102.19 and the breakout of 103.04 (100-day SMA) would open the door to 104.69 (monthly high May 31) and then 105.28 (200-day SMA). On the downside, the next support emerges at 102.04 (monthly low June 16) followed by 100.78 (2023 low April 14) and finally 100.00 (round level).