• US Dollar Index lacks clear direction after reversing from 11-week high.
• Mixed US data, positioning for key catalysts allowed DXY bulls to retreat.
• US Senate voting on debt ceiling deal, employment clues eyed for clear directions.

US Dollar Index (DXY) renews intraday low near 104.00 while keeping the previous day’s pullback from a multi-day top amid early Wednesday. In doing so, the greenback’s gauge versus six major currencies drop for the second consecutive day after reversing from the highest levels since mid-May, as well as snapping the five-day uptrend on Tuesday.

The greenback’s latest weakness could be linked to the market’s fears that the US policymakers will stop the US debt ceiling deal in the Congress despite looming default. Adding strength to the DXY’s retreat are the mixed US data and month-end positioning.

Talking about the data, the US Conference Board's (CB) Consumer Confidence Index edged lower to 102.30 for May from an upwardly revised 103.70 prior marked in April (from 101.30). Additional details of the survey report mentioned that the one-year consumer inflation expectations ticked down to 6.1% in May from 6.2% in April. Further, the Dallas Fed Manufacturing Business Index for May dropped further to -29.1 from -23.4 and versus -19.6 market expectations.

It should be noted, however, that Richmond Fed President Thomas Barkin said that he is seeing evidence that interest rate hikes are curbing demand.

Elsewhere, US Republicans like Chip Roy and Ralph Norman showed readiness to turn down the US debt ceiling agreement but softer US data put a floor under the risk-off mood.

Against this backdrop, Wall Street closed mixed but the US Treasury bond yields remained pressured.

Although the DXY is likely to remain pressured ahead of the key data/events, a positive outcome of the Senate’s voting on the measures to avoid US default, which is very much likely, can keep the greenback buyers in the driver’s seat. Also, the US JOLTS Job Openings for April is likely to ease and hence a positive surprise from the same may strengthen the hawkish Fed bets and can recall US Dollar bulls. It’s worth noting, however, that any clear negatives from the US Congress won’t be taken lightly.

Technical analysis

Although the overbought RSI and a downside break of a two-week-old ascending trend line’s break keeps the US Dollar Index bears hopeful, the 200-day Exponential Moving Average (EMA), currently around 103.85, limits the DXY’s immediate downside.