Ella 
Against the background of improving risk sentiment, the US dollar index came under downward pressure after two consecutive gains and gave up some of the recent gains to the 102.80/85 area.
At the same time, U.S. bond yields are hovering, and the market expects the U.S. July CPI data to be released on Thursday will decline, which should support the view that the Fed may temporarily end interest rate hikes.
It’s worth recalling that Fed Chair Bowman on Monday advocated for further rate hikes amid easing deflationary pressures, while her colleague T. Barkin reiterated that inflation remains too high and the labor market appears resilient, while P. A pause in rate hikes at current levels and a possible rate cut in 2024 leave the door open.
The index continues to trade above 102.00 but appears to be encountering strong resistance around the monthly high of 102.90.
In addition to risk appetite trends, the dollar could face additional headwinds from the Fed’s data-dependent stance against a backdrop of persistent deflation and a cooling job market.
In addition, market expectations that July may be the last rate hike in the current rate hike cycle also temporarily weighed on the dollar.
Key US events of the week: MBA mortgage applications (Wednesday). Inflation, initial jobless claims (Thursday), producer price index, University of Michigan flash consumer sentiment (Friday).
Hot Issue: Ongoing debate over soft or hard landing for the US economy. Near-peak terminal rates and speculation of a rate cut in late 2023 or early 2024. Geopolitical conflict with Russia and China. US-China trade conflict.
The index is currently down 0.15% at 102.39, with initial support at 101.74 (low on August 4), followed by 100.55 (low on July 27) and 100 (psychological threshold). On the other hand, a break above 102.84 (weekly high Aug 03) would open the door to 103.43 (200-day SMA) and 103.57 (high June 30).
