USD Index regains some poise near 104.30, looks at data, debt ceiling

• The index regains the smile and hovers around the 104.30 region.
• US lawmakers will vote on the debt ceiling bill late on Tuesday.
• US Consumer Confidence takes centre stage across the pond.

The greenback, in terms of the USD Index (DXY), flirts with recent tops in the 104.40/50 band ahead of the opening bell in the old continent on turnaround Tuesday.

USD Index focuses on data and debt ceiling vote

The index regains balance following Monday’s Memorial Day holiday and advances to the area of recent multi-week highs near 104.50 as US traders return to their desks on Tuesday.

Back to the debt ceiling issue and following the bipartisan agreement to suspend it clinched over the weekend, US lawmakers in the House and Senate are expected to discuss the bill and vote on Wednesday.

In fact, the bill is anticipated to be voted on by the House Rules Committee on Tuesday afternoon. Three of the nine Republicans on the panel, which is split 9-4 between Republicans and Democrats, are conservative hardliners who are opposed of the arrangement, which means they may kill the package if no Democrats vote for it.

In the meantime, investors slowly refocus on the upcoming US jobs report (Friday) amidst rising speculation of further tightening at the Fed’s gathering on June 14. So far, CME Group’s FedWatch Tool sees the probability of a 25 bps rate hike at around 65%.

In the US data space, the Consumer Confidence gauge tracked by the Conference Board will take centre stage seconded by FHFA’s House Price Index for the month of March.

What to look for around USD

The index picks up fresh pace and trades close to recent highs in the 104.40/50 band on Tuesday.

In the meantime, rising bets of another 25 bps at the Fed’s next gathering in June appear underpinned by the steady resilience of key US fundamentals (employment and prices mainly) amidst the ongoing rally in US yields and the DXY.

Favouring a pause by the Fed, instead, appears the extra tightening of credit conditions in response to uncertainty surrounding the US banking sector.

Key events in the US this week: FHFA’s House Price Index, CB Consumer Confidence (Tuesday) – MBA Mortgage Applications, Fed’s Beige Book (Wednesday) – ADP Employment Change, Initial Jobless Claims, Final Manufacturing PMI, ISM Manufacturing PMI, Construction Spending (Thursday) – Nonfarm Payrolls, Unemployment Rate (Friday).

Eminent issues on the back boiler: Debt ceiling. 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 up 0.14% at 104.41 and the surpass of 104.45 (monthly high May 30) would open the door to 105.65 (200-day SMA) and then 105.88 (2023 high March 8). On the flip side, the next support emerges at the 100-day SMA at 102.87 seconded by the 55-day SMA at 102.45 and finally 101.01 (weekly low April 26).