At the time of posting this, the USD index was trading near the 104.50 level as the risk appetite had improved somewhat mildly. But the overall trend of the USD index is still bearish after the recent economic data.
For now, it appears the USD index will continue to trade below 105, considering the current crisis of the banking system. On top of that, the US bonds are also giving mixed signals, which are preventing the US Dollar from gaining traction.
If we look at the economic releases, we already have the initial jobless claims as well as Philly Fed Manufacturing Index. Similarly, the housing sector is also showing a healthy increase which is a sign of economic progress.
However, investors are still focused on the concerns surrounding the global banking system. Although the issue of Credit Suisse is solved after a $45 billion loan, it has revealed that even the big banks are very fragile.
For now, the USD index is under the risk aversion mood amid the jitters from the banking sector and the selling of the US Dollar. After all, the EUR has won the favor of investors with an interest rate hike - So even that is supporting the case of a rather weak US Dollar.
That's why we believe that the US Dollar is under pressure, as evident by the recent performance of the USD index. To top it off, the inflation in the USA is still higher than what's acceptable for the Fed.
Looking ahead, any news from the Fed or a new rate hike will likely put energy in the USD once again and could push the USD index higher.
But if the Fed says no to a rate hike during the meeting, that would mean further downside for the USD index. To see the outcome, we will have to wait for the Fed meeting or comments from the Fed members.