US Dollar cuts losses, around 100.50 ahead of US data

The US Dollar Index – which gauges the buck vs. its main rivals – is extending its rebound from session lows to the current mid-100.00s area.

US Dollar focus on data

The index has managed to almost fully revert the initial negative tone and is now flirting with the positive territory in the 100.50/55 band, as market participants seem to have already digested Friday’s Q4 GDP figures. Recall that the economy is expected to have expanded at an annualized 1.9% during the October-December period, lower than initial estimates.

USD has thus filled the earlier gap lower and is extending the rebound from last week’s lows in the 99.80/70 band, where sellers met strong support for the time being.

In the meantime, DXY is looking to resume the rally with the focus on the FOMC meeting due on Wednesday and January’s Payrolls expected on Friday. According to CME Group’s FedWatch tool, the probability of a rate hike this week stays at 96% based on Fed Funds futures prices, although market consensus is more tilted towards the June meeting as the appropriate timing for another move up in rates.

The recent leg lower in the buck has been reflected on the positioning front, with USD speculative net longs receding to levels last seen in mid-November on the week to January 24, as shown by the latest CFTC report.

In the data space, inflation figures tracked by the PCE (Fed’s favourite gauge) are due followed by Personal Income/Spending and December’s Pending Home Sales.

US Dollar relevant levels

The index is losing 0.04% at 100.52 facing the immediate support at 99.77 (low Jan.26) followed by 99.49 (low Dec.8) and then 99.41 (100-day sma). On the other hand, a break above 100.81 (high Jan.27) would open the door to 101.20 (20-day sma) and finally 101.44 (55-day sma).