USD Index looks consolidative above 106.00 ahead of data, Fedspeak

• The index alternates gains with losses in the low-106.00s.
• US yields trade within narrow ranges near recent peaks.
• Housing data, Fed Beige Book, Fedspeak take centre stage midweek.

The USD Index (DXY), which gauges the greenback vs. a bundle of its main competitors, navigates a tight range in the 106.10-106.20 band ahead of the opening bell in the old continent on Wednesday.

USD Index focuses on data, Fed speakers

The index extends the range bound theme in the lower end of the weekly range amidst unclear direction in the global markets.

Indeed, while better-than-expected Chinese data underpins the appetite for the risk complex, the deterioration of the geopolitical scenario in the Middle East seems to favour the resurgence of the risk aversion.

In the meantime, the index appears supported by the 106.00 zone against the backdrop of rising speculation of a tighter-for-longer stance from the Federal Reserve, a view that was further propped up following Tuesday’s stronger-than-expected readings from US Retail Sales and Industrial Production.

Later in the session, Housing Starts and Building Permits are due along with usual MBA Mortgage Applications, the Fed’s Beige Book and TIC Flows.

In addition, investors will closely follow speeches from FOMC C. Waller (permanent voter, centrist), NY Fed J, Williams (permanent voter, centrist), FOMC M. Bowman (permanent voter, hawk) and Philly Fed P. Harker (voter, hawk).

What to look for around USD

The index so far trades without a clear direction just above the 106.00 hurdle ahead of key Fedspeak on Wednesday.

In the meantime, support for the dollar keeps coming from the good health of the US economy, which at the same time appears underpinned by the renewed tighter-for-longer stance narrative from the Federal Reserve.

Key events in the US this week: MBA Mortgage Applications, Building Permits, Housing Starts, Fed Beige Book, TIC Flows (Wednesday) - Initial Jobless Claims, Philly Fed Manufacturing Index, CB Leading Index, Existing Home Sales, Fed Powell (Thursday).

Eminent issues on the back boiler: Persevering debate over a soft or hard landing for the US economy. Incipient speculation of rate cuts in early 2024. Geopolitical effervescence vs. Russia and China and the Middle East.

USD Index relevant levels

Now, the index is down 0.05% at 106.14 and faces the next support at 105.53 (monthly low October 12) ahead of 104.42 (weekly low September 11) and then 103.23 (200-day SMA). On the other hand, a breakout of 106.78 (weekly peak October 13) could expose 107.34 (2023 high October 3) and finally 107.99 (weekly high November 21 2022).