US Dollar Index: DXY traces sturdy yields to print five-week high near 103.00 ahead of Fed Minutes

US Dollar Index (DXY) remains on the front foot around 102.90 as it renews the five-week high amid the early hours of Monday’s Asian session. In doing so, the Greenback’s gauge versus the six major currencies cheer the looming economic fears surrounding China, as well as the recently positive US data. However, the cautious mood ahead of this week’s top-tier US data and Minutes of the latest Federal Open Market Committee (FOMC) monetary policy meeting prods the DXY buyers of late.

Weekend news of China’s Country Garden pausing its bond trading and a few companies’ complaints of not receiving payments from a subsidiary of Chinese conglomerate Zhongzhi Enterprise Group seem to recently propel the US Treasury bond yields. That said, US 10-year Treasury bond yields rose for the fourth consecutive week in the last and underpinned the DXY run-up.

It should be noted that the geopolitical concerns about China and Russia and the mostly upbeat US data also favor the US Dollar Index bulls.

During the last week, US Consumer Price Index (CPI) numbers for July failed to lift the Fed bets for September, suggesting the nearness to the policy pivot. However, the CPI details and other price pressure measures managed to keep the Greenback buyers hopeful. It’s worth noting that the US Producer Price Index (PPI) for July, the preliminary readings of the University of Michigan’s (UoM) Consumer Sentiment Index (CSI) for August and the UoM 5-Year Consumer Inflation Expectations for the said month helped the USD benefit on Friday. Further, the US one-year inflation outlook edged lower to 3.3% from 3.4%.

That said, Federal Reserve (Fed) Governor Michelle Bowman backed additional rate hikes and defended the Fed hawks. However, San Francisco Fed Bank President Mary Daly, Philadelphia Fed Bank President Patrick Harker and New York Fed President John Williams signaled rate cuts in 2024 but also highlighted data-dependency and kept the policy doves looking for more details to confirm the bias.

Elsewhere, Russia’s firing of warning shots at a warship in the Black Sea joins the US-China trade/technology war to propel the yields and the DXY.

It’s worth noting, however, that the hopes of more liquidity infusion from China and expectations that the Federal Reserve (Fed) will refrain from rate hikes in September defends the equity buyers and prod the DXY bulls.

Moving on, the US Retail Sales and Minutes of the latest Fed meeting’s minutes will be crucial for the DXY traders to watch for clear directions. Above all, the US bond market moves and China news are important to follow for fresh impulse.

Technical analysis

A clear upside break of the 10-week-old descending resistance line, now immediate support near 102.45, directs the US Dollar Index (DXY) bulls toward a downward-sloping trend line stretched from March 08, close to 103.25 at the latest.