USD Index breaches 102.00 and drops to 7-month lows

U.S. economy
  • The indicator maintains its downward trend below the 102.00 level.
  • The markets are still adjusting to the dovish hike by the Fed.
  • Later on Thursday, Weekly Claims and New Home Sales take centre stage.

The dollar continues to be on the back foot when measured by the Dollar Index (DXY), breaking below the 102.00 benchmark for the first time since early February.

Dollar Index declines after FOMC
The index last saw a six-session run of declines in the middle of October 2021.

The Federal Reserve’s dovish move on Wednesday, coupled with Chief Powell’s equally pessimistic remarks during his press conference, gave the dollar’s downward trend more momentum and caused the index to drop to new multi-week lows.

The substantial decline in the index is currently being accompanied by the lack of movement in US yields across the curve.

Weekly Initial Claims, New House Sales, and the Chicago Fed National Activity Index will typically take centre stage in the US data arena later in the NA day.

What to watch out for about USD
As investors continue to process the results of the most recent Fed meeting, the index remains significantly under pressure and drops back to multi-week lows in the sub-102.00 range.

Meanwhile, declining banking concerns keep the risk complex strong and maintain the current low price action in the area of the dollar.

The dollar should currently suffer from speculation of the Fed switching policy in the near future, despite the fact that the US economy is still robust, inflation is still high, and Fed speakers have a hawkish tone.

Initial Jobless Claims, the Chicago Fed National Activity Index, New Home Sales (Thursday), Durable Goods Orders, and Advanced PMIs are this week’s major US events (Friday).

Important problems with the back boiler: increasing belief in a soft landing for the American economy. persistent mythology supporting a Fed policy of continued tightening. Around 5.5% terminal rates? Fed’s reversal. Political effervescence in relation to China and Russia. US-China trade dispute.

Relevant Dollar Index levels
The index is currently declining by 0.44% at 102.07, and a break of 101.93 (the month’s low on March 23) will allow access to 100.82 (the year 2023 low on February 2) and ultimately 100.00. (psychological level). The following resistance, however, appears at 105.88 (2023 high March 8), followed by 106.60 (200-day SMA), and finally 107.19. (weekly high November 30 2022).