US Dollar Index: Bears retake the initiative and challenge 102.00
|- DXY comes under pressure and revisits 102.00.
- US yields extend the monthly recovery on Monday.
- 3-month/6-month Bill Auctions will be on tap later in the NA session.
The greenback starts the trading week on the defensive and drags the US Dollar Index (DXY) back to the 102.00 neighbourhood.
US Dollar Index looks to yields, cautious ahead of CPI
The index extends the erratic performance seen in past sessions and revisits the 102.00 area on the back of the better mood in the risk complex and further upside in US yields.
Recent fresh geopolitical effervescence remained unnoticed for the FX galaxy, while market participants appear focused on the release of inflation figures tracked by the CPI later in the week as well as usual chatter around the Fed’s probable next moves on rates for the remainder of the year.
In the US cash markets, the risk-on tone favours the intense selling pressure around bonds and collaborates with the underlying upside bias in yields along the curve.
Nothing scheduled data wise in the US calendar but short-term bill auctions on Monday.
What to look for around USD
The index keeps trading in a choppy fashion on Monday, with occasional bullish attempts so far limited around the 102.70 zone.
Recent weakness in the dollar came in response to the rising perception that inflation might have peaked in April, which in turn supports the idea that the Fed may not need to be as aggressive as market participants expect when it comes to raising the Fed Funds rates.
In the meantime, the Fed’s divergence vs. most of its G10 peers coupled with bouts of geopolitical effervescence, higher US yields and a potential “hard landing” of the US economy are all factors still supportive of a stronger dollar in the next months.
Key events in the US this week: Balance of Trade, Consumer Credit Change (Tuesday) – MBA Mortgage Applications, Wholesale Inventories (Wednesday) – Initial Claims (Thursday) – Inflation Rate, Flash Consumer Sentiment, Monthly Budget Statement (Friday).
Eminent issues on the back boiler: Powell’s “softish” landing… what does that mean? Escalating geopolitical effervescence vs. Russia and China. Fed’s more aggressive rate path this year and 2023. US-China trade conflict. Future of Biden’s Build Back Better plan.
US Dollar Index relevant levels
Now, the index is retreating 0.22% at 101.94 and faces the next contention at 101.44 (55-day SMA) followed by 101.29 (monthly low May 30) and then 99.81 (weekly low April 21). On the upside, a break above 102.73 (weekly/monthly high June 1) would open the door to 105.00 (2022 high May 13) and finally 105.63 (high December 11 2002).
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.