US Dollar Index: DXY approaches monthly high past 104.00 as sentiment dwindles, US politics, macros eyed
|- US Dollar Index regains upside momentum after downbeat start of the week.
- Uncertainty about US debt ceiling deal’s passage through Congress, anxiety ahead of the key data underpins greenback’s haven demand.
- Republicans criticize agreement to avoid US default, political turmoil in Eurozone also favor DXY long.
- Risk catalysts, US CB Consumer Confidence eyed for fresh impulse.
US Dollar Index (DXY) bulls attack the key upside hurdle surrounding 104.30 as it benefits from the return of full markets amid early Tuesday in Asia.
In doing so, the greenback’s gauge versus six major currencies picks up bids as traders rush to risk safety amid uncertainty surrounding the US debt ceiling deal’s passage, as well as due to the cautious mood ahead of the key US data. Apart from that, the risk-negative headlines from the European and Chinese political frontiers also allow the DXY to grind higher as it approaches the highest levels since November 2022, marked in the last week.
On Monday, the DXY began the week on a softer footing in reaction to US President Joe Biden and House Speaker Kevin McCarthy’s weekend announcement of an agreement to avoid the debt-ceiling expiration. However, some of the policymakers, mostly Republicans, are against the adjustments made to reach the deal and stay ready to challenge the move in the House, as well as in the Senate, which in turn raises market fears as the US approaches the June 5 deadline for default.
“A handful of hard-right Republican lawmakers said on Monday they would oppose a deal to raise the United States' $31.4 trillion debt ceiling, in a sign that the bipartisan agreement could face a rocky path through Congress before the U.S. runs out of money next week,” said Reuters.
Additionally favoring the US Dollar Index bulls are the hawkish Fed bets amid upbeat prints of the US PMIs, Durable Goods Orders and Q1 GDP and inflation signals. It should be noted that the political fears in Eurozone and the US-China tension, as well as recession woes in the bloc, also underpin the US Dollar’s haven demand. That said, Spanish Prime Minister (PM) Pedro Sanchez announced snap elections in July while Greek President is up for appointing a caretaker PM ahead of a repeat election on June 25. Additionally, the last week’s downward revision to Germany’s first quarter (Q1) Gross Domestic Product (GDP) figures renewed recession fears in the bloc and also favor the DXY bulls.
Amid these plays, the European yields edged lower on Monday while the equities futures grind higher.
Looking ahead, developments about the US debt ceiling agreement and the US CB Consumer Confidence for May will be crucial for the US Dollar Index traders to watch for intraday directions.
Also read: US Consumer Confidence Preview: Confidence remains down, but DXY aims up
Technical analysis
A clear upside break of a six-month-old falling resistance line, around 104.30 by the press time, becomes necessary for the US Dollar Index (DXY) bulls to keep the reins.
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.