US Dollar Index advances modestly to the 98.50 area, focus on yields, Powell

DXY trades with marginal gains in the mid-98.00s.
Upside in US yields seem to have entered a pause mode.
Powell, Daly, housing data next in the US calendar.

Pablo Piovano FXStreet

The US Dollar Index (DXY), which tracks the greenback vs. its main rivals, so far manages well to leave behind Tuesday’s pullback and chart decent gains around the 98.50 region.

US Dollar Index looks to geopolitics, Fed

The index regains upside traction and reclaims ground lost on Tuesday on the back of the offered tone in the risk-linked assets, while the recent strong upside in US yields appears to have run out of some steam for the time being.

Also collaborating with the bid bias in the buck appears the absence of news from the geopolitical scenario along with the lack of progress seen in the Russia-Ukraine peace talks in past hours.

Later in the US docket, Chief Powell will participate in a virtual discussion panel organized by the BIS. In addition, San Francisco Fed M.Daly is due to speak, while MBA Mortgage Applications, New Home Sales and the EIA’s report on US crude oil supplies will also be on tap later in the NA session.

What to look for around USD

The weekly recovery in the dollar met resistance near 99.00 so far. Concerns surrounding the geopolitical landscape prop up further the demand for the buck in combination with the offered stance in the risk-associated complex. Looking at the broader picture, bouts of risk aversion – exclusively emanating from Ukraine - should underpin inflows into the safe havens and lend legs to the dollar at a time when its constructive outlook remains well supported by the current elevated inflation narrative, a potential more aggressive tightening stance from the Fed and the solid performance of the US economy.

Key events in the US this week: MBA Mortgage Applications, Fed Powell, New Home Sales (Wednesday) – Initial Claims, Durable Goods Orders, Flash PMIs (Thursday) – Final Consumer Sentiment, Pending Home Sales (Friday).

Eminent issues on the back boiler: Escalating geopolitical effervescence vs. Russia and China. Fed’s rate path this year. US-China trade conflict. Futures of Biden’s Build Back Better plan.

US Dollar Index relevant levels

Now, the index is up 0.15% at 98.56 and a break above 98.96 (weekly high March 22) would open the door to 99.29 (high March 14) and finally 99.41 (2022 high March 7). On the flip side, the next down barrier emerges at 97.72 (weekly low March 17) followed by 97.71 (weekly low March10) and then 97.44 (monthly high January 28).

Author

Pablo Piovano

FXStreet

Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.

AUD/USD gains traction near 0.7100 as the post-Fed USD rally pauses

AUD/USD finds fresh buyers and retakes 0.7100 in the Asian session on Thursday as the US Dollar pauses its hawkish Fed-inspired rally to its highest level since late July. However, RBA rate-hike bets and hopes for US-Iran diplomatic efforts lift risk sentiment and support the risk-sensitive Australian Dollar and the major.

USD/JPY reverses a dip below 156.00 as focus shifts to BoJ

USD/JPY is reversing a brief dip below 156.00 in the Asian session on Thursday, looking to snap a three-day winning streak to a nearly two-week top set the previous day. The US Dollar pauses following the post-Fed rally to seven-week highs, while a more hawkish repricing of the BoJ's policy normalization path supports the Japanese Yen. This keeps the pair's upside limited, with the focus now shifting to the BoJ policy decision due on Friday.

Gold pops to weekly highs near $4,400

Gold climbs sharply and clinches fresh weekly peaks around the $4,480 zone per troy ounce on Thursday. The precious metal’s bounce leaves behind three daily declines in a row and follows the marked retracement in the US Dollar as well as another negative performance of crude oil prices.

BoE recap: A cautious stance amid rising inflation risks

The Bank of England left Bank Rate unchanged at 3.75% but delivered a distinctly hawkish message as its inflation outlook deteriorated sharply.

One hike down, more to come? The Fed’s new rate path says yes

The Federal Reserve (Fed) raised its Fed Fund Target Range (FFTR) range by 25 basis points to 3.75%-4.00% in a unanimous decision, saying the move would support a timelier return to its 2% inflation goal.

How Japan became the World's Banker and why that era may be ending

Japan's ultra-low interest rates helped finance trillions of dollars in global investments for more than a decade, making the Japanese Yen one of the world’s cheapest sources of funding. With the Bank of Japan expected to tighten policy again this week, that advantage may be entering a new phase. While most major economies raised interest rates, Japan remained the world's outlier.