The US Dollar Index (DXY), which gauges the greenback vs. a bundle of its main competitors, comes under some mild downside pressure and challenges the 107.00.
US Dollar Index now looks to the Fed – The index now gives away part of Tuesday’s strong advance and hovers around the 107.00 neighborhood, all amidst a cautious note ahead of the FOMC event due later in the NA session.
The Fed, in the meantime, is primarily anticipated to raise the Fed Funds Target Range by 75 bps to 2.25%-2.50%. However, investors will closely follow the subsequent press conference by Chief Powell looking for further details regarding further moves on rates in the next months.
Other than the Fed gathering, Durable Goods Orders, MAB Mortgage Applications, and advanced Goods Trade Balance figures are also due in the NA session.
What to look for around USD? The index came under downside pressure following nearly 20-year highs north of the 109.00 mark in mid-July, although it seems to have met some decent support near 106.00 for the time being.
So far, the dollar remains underpinned by the Fed’s divergence vs. most of its G10 peers (especially the ECB) in combination with bouts of geopolitical effervescence and the re-emergence of risk aversion among investors.
On the flip side, market chatter about a potential US recession could somewhat undermine the uptrend trajectory of the dollar.
Key events in the US this week: MBA. Mortgage Applications, Durable Goods Orders, Advanced Goods Trade Balance, Pending Home Sales, Fed Interest Rate Decision, Powell Press Conference (Wednesday) – Flash Q2 GDP, Initial Claims (Thursday) – PCE Price Index, Personal Income, Personal Spending, Final Michigan Consumer Sentiment (Friday).
Eminent issues on the back boiler: Hard/soft/softish? landing of the US economy. Escalating geopolitical effervescence vs. Russia and China. Fed’s more aggressive rate path this year and 2023. US-China trade conflict. Future of Biden’s Build Back Better plan.
Dollar Index Long (Buy) Enter at: 107.283 T.P_1: 108.427 T.P_2: 109.357 T.P_3: 111.137 S.L: 105.949
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