USD Index (DXY) showed optimism last Friday and briefly surpassed the 103.00 barrier on Monday before retreating. The index couldn't sustain the initial bull run past the 103.00 hurdle amidst some recovery in the risk complex, although the risk-off mood appears to prevail so far in the European morning. The uptick in the dollar looks underpinned by the mild recovery in US yields following Friday's retracement, while some speculation points to a 25 bps rate hike at the May event that could support the dollar's upbeat mood.
Later in the session, the focus will be on the release of the ISM Manufacturing and the final Manufacturing PMI for March. February's Construction Spending and the speech by FOMC L. Cook (permanent voter, centrist) are also due.
There are some concerns about the bearish outlook for the dollar as the Federal Reserve could pause its ongoing tightening stance, which has been propped up by persevering disinflation, nascent weakness in some key fundamentals, and fresh concerns surrounding the banking sector. Dwindling hawkishness from Fed rate setters also seems to have removed some strength from the greenback, particularly since the latest FOMC gathering and events around SVB and other medium-size US lenders.
Key events in the US this week include Final Manufacturing PMI, ISM Manufacturing, Construction Spending (Monday), Factory Orders (Tuesday), MBA Mortgage Applications, ADP Employment Change, Balance of Trade, Final Services PMI, ISM Non-Manufacturing (Wednesday), Initial Jobless Claims (Thursday), Non-Farm Payrolls, Unemployment Rate, Consumer Credit Change (Friday).
The USD Index is advancing 0.12% at 102.71 and faces the next resistance level at 103.37 (55-day SMA) followed by 104.01 (100-day SMA) and then 105.88 (2023 high March 8). On the other hand, the breach of 101.93 (monthly low March 23) would open the door to 100.82 (2023 low February 2) and finally 100.00 (psychological level).
