The US Dollar (USD) pared its earlier losses on Monday after hawkish comments from Federal Reserve Vice Chair Philip Jefferson. The week promises to pick up steam in terms of economic data releases.

Fed Rhetoric Bolsters USD:

• Jefferson’s remarks advocating for holding rates steady countered initial downward pressure on the Dollar.

Economic Data in Focus:

• The week starts slow on the data front, but key releases are on the horizon.
• Tuesday brings the US Producer Price Index (PPI) data.
• Wednesday’s highlight is the US Consumer Price Index (CPI) data, a crucial inflation gauge.

Fed Speakers Take Center Stage:

• Two voting members of the Federal Open Market Committee (FOMC), Jefferson and Loretta Mester, are scheduled to speak on Monday.

Technical Analysis: US Dollar Index (DXY) at Crossroads

• The DXY faces a potential pullback after a strong run.
• Three scenarios are being considered by markets:
  
  • Stagflation: Economic slowdown with persistent inflation, limiting the Fed’s ability to cut rates (negative for USD).
  • Renewed Disinflation: Inflationary pressures cool, potentially leading to a June rate cut (negative for USD).
  • Strong Economic Data + High Inflation: Supports further rate hikes (positive for USD).

Key Resistance Levels:

• 105.52 (pivotal level since April 11) needs to be breached for an upside move.
• 106.52 (April 16th high) could be retested.

Support Levels:

• 55-day and 200-day SMAs (104.54 and 104.25) provided support earlier.
• 100-day SMA (103.89) could act as further support if needed.

The US Dollar’s direction hinges on incoming economic data and its impact on Fed policy expectations. The upcoming inflation data (CPI) will be particularly important. The technical chart suggests a potential downside move, but the scenario ultimately depends on economic data confirmation.