USD Index struggles for direction around 106.50, focus on data, Powell

• The index meets resistance around the 106.50 area.
• Chief Powell will discuss the Economic Outlook later in the session.
• Weekly Claims, Philly Fed index, Fedspeak take centre stage as well.

The greenback exchanges gains with losses in the mid-106.00s when tracked by the USD Index (DXY) on Thursday.

USD Index faces initial resistance near 106.70

The index comes under some mild selling pressure following Wednesday’s marked gains to the 106.70 region, all amidst alternating risk appetite trends and some prudence ahead of the speech by Fed’s Powell later in the session.

In the meantime, US yields maintain its march north well in place and appears underpinned by the Fed’s tighter-for-longer narrative, which in turn finds support in the persistent resilience of the US economy.

Later in the session, all the attention will be on Chief Powell and his discussion on the Economic Outlook at the Economic Club of New York. In addition, FOMC P. Jefferson (permanent voter, centrist), Chicago Fed A. Goolsbee (voter, centrist), Atlanta Fed R. Bostic (2024 voter, centrist), FOMC M. Barr (permanent voter, centrist) and Philadelphia Fed P. Harker (voter, hawk) are all due to speak.

In the docket, usual weekly Initial Claims are due in the first turn followed by the Philly Fed Manufacturing Index, the CB Leading Index, Existing Home Sales and the Monthly Budget Statement.

What to look for around USD

The index so far trades without a clear direction near 106.50, as market participants continue to assess geopolitical risks, key US data and get ready to Powell’s speech.

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: 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 0.01% at 106.56 and faces the next support at 105.53 (monthly low October 12) ahead of 104.42 (weekly low September 11) and then 103.27 (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).