US Dollar Index: Buyers keep targeting 103.00

The US Dollar Index (DXY), which tracks the greenback vs. a bundle of its main rival currencies, alternates gains with losses around the 103.00 zone on Friday.

US Dollar Index within a tight range amidst risk-on trade

Following Thursday’s deep decline, the index keeps the familiar range around the 103.00 region in an uneventful session at the end of the week.

The risk appetite, however, seems to be leaning towards the riskier assets, as noted after a positive start of the US stock markets, all following the earlier rate cut by the PBoC. Indeed, the Chinese central bank pumped extra stimulus into the markets after it reduced the 5y Loan Prime Rate by 15 bps to 4.45%.

Nothing scheduled in the US docket on Friday should leave investors assessing the weekly slew of Fed-speakers – all favouring 50 bps rate hike at the June meeting – along with rising concerns over the probability of a global economic slowdown as well as a “hard landing” of the US economy in response to the Fed’s tighter stance.

What to look for around USD

The dollar attempts a mild rebound to the 103.00 neighbourhood following the multi-session drop recorded on Thursday. In the meantime, and supporting the buck, appears investors’ expectations of a tighter rate path by the Federal Reserve and its correlation to yields, the current elevated inflation narrative and the solid health of the labour market. On the negatives for the greenback turn up the incipient speculation of a “hard landing” of the US economy as a result of the Fed’s more aggressive normalization.

Eminent issues on the back boiler: Speculation of a “hard landing” of the US economy. 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 gaining 0.12% at 102.99 and the breakout of 105.00 (2022 high May 13) would open the door to 105.63 (high December 11 2002) and finally 106.00 (round level). On the other hand, the next support lines up at 102.65 (weekly low May 19) followed by 102.35 (low May 5) and then 99.81 (weekly low April 21).