US Dollar Index clings to gains around 103.30 ahead of CPI

DXY wobbles around the 103.30 region.
US yields show a mixed performance on Friday.
Markets’ attention will be on the US CPI release.

Pablo Piovano FXStreet

The greenback, when tracked by the US Dollar Index (DXY), exchanges gains with losses in the 103.30 region at the end of the week.

US Dollar Index capped by 103.35/40

The index trades in an erratic fashion on Friday following Thursday’s strong advance to the area beyond the 103.00 figure.

The intense sell-off in the risk complex gathered extra steam after the ECB did not sound as hawkish as many were expecting at its event on Thursday, lending extra wings to the buck and propelling the index to fresh multi-week highs past the 103.00 yardstick.

In the US cash markets, yields in the belly and the long end of the curve appear to be taking a breather on Friday vs. the continuation of the uptrend in the short end.

In the US data space, it will be all about inflation later in the session with the publication of May’s CPI figures as well as the advanced June's Consumer Sentiment gauge.

What to look for around USD

The index reclaimed the 103.00 mark and beyond after the ECB failed to surprise market participants on Thursday.

The dollar, in the meantime, appears supported in the short term following the resumption of the selling bias in the risk-associated space, while 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: 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 gaining 0.01% at 103.32 and a break above 103.36 (monthly high June 9) would open the door to 105.00 (2022 high May 13) and finally 105.63 (high December 11 2002). On the other hand, the next contention emerges at 101.75 (55-day SMA) followed by 101.64 (monthly low June 3) and then 101.29 (monthly low May 30).

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: Upside appears capped by $4,400

Gold climbs sharply and clinches fresh weekly peaks on Thursday, although the bull run seems to have met some initial hurdle around the $4,400 zone per troy ounce. The yellow metal’s rebound reverses three daily declines in a row and follows the modest 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.