DXY Index technical analysis
The USD Index, as measured by the DXY, is currently trading around the 103.30 region without a clear direction. It has been experiencing alternating gains and losses in recent sessions.
The focus in the market remains on the ongoing debt ceiling talks in the United States. Despite discussions between President Biden and House Speaker McCarthy, no deal has emerged yet. Reports suggest that the negotiations have had a productive tone, and further talks are expected to prevent a default, which could potentially occur as early as early June, as stated by Treasury Secretary Janet Yellen.
In terms of upcoming data, the US calendar will feature housing data, including New Home Sales, as well as flash Purchasing Managers' Index (PMI) readings for the manufacturing and services sectors. Additionally, there will be a speech by Dallas Fed's L. Logan, who is a voter and considered a hawk.
Regarding the USD outlook, the index is gradually advancing above the key barrier at 103.00, supported by cautious market sentiment surrounding the debt ceiling negotiations. Bulls have their sights set on immediate targets around the 103.60/65 range, which represents monthly highs. The resilience of key US fundamentals, particularly employment and prices, has contributed to a diminishing expectation of an imminent pause in the Federal Reserve's normalization process.
H4 chart outlook
However, there are concerns about the US banking sector, leading to speculation of extra tightening of credit conditions and potentially favoring a pause by the Fed.
Looking ahead, notable events in the US this week include the release of flash Manufacturing and Services PMIs, New Home Sales, MBA Mortgage Applications, FOMC Minutes, Initial Jobless Claims, Chicago Fed National Activity Index, Pending Home Sales, Advanced Q1 GDP Growth Rate, PCE/Core PCE, Durable Goods Orders, Flash Goods Trade Balance, Personal Income/Spending, and the Final Michigan Consumer Sentiment.
Some important topics that continue to be relevant are the debate over a soft/hard landing of the US economy, the terminal interest rate nearing its peak versus speculation of rate cuts in late 2023/early 2024, the Federal Reserve's pivot, geopolitical tensions involving Russia and China, and the US-China trade conflict.
In terms of technical levels, the USD Index is currently up 0.10% at 103.33. A break above 103.62, which represents the monthly high on May 18, could potentially open the door to further gains toward the 200-day simple moving average (SMA) at 105.74 and the 2023 high of 105.88, recorded on March 8. On the downside, the next support level is the 55-day SMA at 102.49, followed by 101.01, which represents the weekly low on April 26, and finally 100.78, the 2023 low on April 14.