USD Index keeps the bearish tone around 104.50 post-data

U.S. economy
  • The index maintains the familiar range in the mid-104.00s.
  • No meaningful reaction after the ECB hiked rates as promised.
  • The Philly Fed index improved marginally to -23.2 in March.

As of Thursday, when measured by the USD Index (DXY), the greenback is still around 104.50. This is because there has been a slight increase in the desire to take risks.

USD Index unchanged on data, ECB

The index keeps the trade well below the 105.00 mark, even though worries about a possible banking crisis on both sides of the ocean are decreasing. The mixed tone of US yields also makes the dollar hard to move.

In the US, Initial Jobless Claims went up by 192K in the week leading up to March 11, and the Philly Fed Manufacturing Index went from -23.2 to -23.2 for this month, a small increase. In February, Building Permits grew by 13.8% MoM, or 1.524 million units, and Housing Starts grew by 9.8% MoM, or 1.45 million units.
In the meantime, investors are less worried about the banking system now that the Swiss National Bank (SNB) will lend Credit Suisse around $54 billion.

What to look for around USD

The index is under pressure now that it hit a new high above 105.00 on Wednesday.

Investors are more sure that the Federal Reserve will raise interest rates by 25 basis points (bps) at its meeting on March 22. This is putting some selling pressure on the dollar and reducing the risk aversion caused by banking worries.

So far, the index is still under pressure because people are betting again on a Fed pivot in the short term. But the fact that inflation is still high and the US economy is strong continue to show that this is not the case.

This week, the most important things happening in the US are: Initial Jobless Claims, Housing Starts, Building Permits, Philly Fed Manufacturing Index (Thursday): Industrial Production, Flash Michigan Consumer Sentiment, and CB Leading Index (Friday).

Important things to think about: More and more people believe that the US economy will land softly. The Fed’s stance of “tighter for longer” has been told over and over again. Rates at the end near 5.5%? Fed’s turn. Russia and China versus geopolitical turbulence. US-China trade conflict.

USD Index relevant levels

Now, the index is down 0.1% at 104.56, and a break below 103.48 (the low for the month on March 13) would open the door to 102.58 (the low for the week on February 14) and then 100.82. (2023 low February 2). On the other hand, the next obstacle is at 105.88 (2023 high March 8), followed by 106.64 (200-day SMA) and then 107.19. (weekly high November 30 2022).