Following Monday’s opening bell in Europe, the dollar, as measured by the USD Index (DXY), experiences some downside pressure and challenges the 104.00 benchmark.

The USD Index examines data and risk trends.
As market participants continue to process Chief Powell’s comments at the Jackson Hole event on Friday, the index starts the week off poorly and falls to the 104.00 area.

Regarding the latter, Powell maintained a message that was largely unchanged from the most recent FOMC meeting (on July 26), but it is important to note that he also reaffirmed the Fed’s intention to maintain its restrictive stance until inflation exhibits a sustained loss of momentum and approaches the target.

Data-wise, only the short-term bill auctions and the Dallas Fed’s regional manufacturing indicator are due.

What to watch out for about USD
With some rebound in the risk complex, the index is now being forced to test the critical support at 104.00.

The US economy’s continued strength, which appears to have revived the debate over the Federal Reserve’s tighter-for-longer approach, continues to boost the dollar in the meantime.

In addition, there seems to be less support lately for the notion that the dollar may suffer due to the Fed’s data-dependent attitude against the backdrop of the ongoing disinflation and cooling of the labour market.

The FHFA House Price Index, JOLTs Job Openings, CB Consumer Confidence, MBA Mortgage Applications, ADP Employment Change, Flash Q2 Growth Rate, Advanced Goods Trade Balance, and Pending Home Sales are this week’s major events in the US. Initial Jobless Claims, Nonfarm Payrolls, Unemployment Rate, Final Manufacturing PMI, ISM Manufacturing PMI, and Construction Spending are some of the economic indicators that will be released this week.

The ongoing discussion of whether the US economy will have a soft or harsh landing is one of the most pressing topics. There are early rumors of rate decreases in 2024. Political effervescence in relation to China and Russia.

Relevant USD Index levels
The 200-day SMA at 103.10, the 55-day SMA at 102.32, and the monthly low of August 4 at 101.75 are all present and immediately supporting the index at 104.05, which is currently down 0.13%. On the plus side, a breakthrough of 104.44 (the monthly high of August 25) would lead to 104.70 (the monthly high of May 31) and eventually 105.80 (the monthly high of March 8, 2023).

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