US Dollar Index extends the downside to 96.10 ahead of data

DXY sheds further ground and approaches the 96.00 neighbourhood.
US yields keep showing an absence of upside traction.
US ADP report will take centre stage later in the NA session.

Pablo Piovano FXStreet

The recent selloff in the greenback remains well and sound and now drags the US Dollar Index (DXY) closer to the 96.00 mark on Wednesday.

US Dollar Index focuses on data, yields

The index loses ground for the third session in a row and puts the 96.00 yardstick to the test amidst the continuation of the upbeat sentiment in the risk complex and the lack of upside traction in US yields.

Indeed, the consolidative phase in the US cash markets prevails so far, prompting yields to extend the range bound theme in the upper end of the recent range as market participants continue to recalibrate their expectations to the potential Fed’s interest rate path.

In the US data space, the ADP report will take centre stage seconded by the weekly figures from Mortgage Applications measured by MBA.

What to look for around USD

The dollar’s corrective move remains well in place following recent 2022 peaks (January 28), always amidst the improved mood in the risk-associated universe and muted US yields. The sharp advance in the index in past sessions followed expectations that the Federal Reserve will start its hiking cycle and quantitative tightening in the relatively short-term horizon. Furthermore, the constructive outlook for the greenback is expected to remain unchanged for the time being on the back of rising yields, persistent elevated inflation, supportive Fedspeak and the solid pace of the US economic recovery.

Key events in the US this week:) ADP Employment Change (Wednesday) – Initial Jobless Claims, ISM Non-Manufacturing PMI, Factory Orders (Thursday) – Nonfarm Payrolls, Unemployment Rate (Friday).

Eminent issues on the back boiler: Fed’s rate path this year. US-China trade conflict under the Biden administration. Debt ceiling issues. Escalating geopolitical effervescence vs. Russia and China.

US Dollar Index relevant levels

Now, the index is losing 0.18% at 96.09 and a break above 97.44 (2022 high Jan.28) would open the door to 97.80 (high Jun.30 2020) and finally 98.00 (round level). On the flip side, the next down barrier emerges at 95.91 (20-day SMA) seconded by 95.41 (low Jan.20) and then 94.62 (2022 low Jan.14).

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.

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