US Dollar Index grinds near 104.00 amid US holiday, Fed Minutes, US GDP eyed

US Dollar Index (DXY) picks up bids to regain 104.00, after the previous day’s reversal from a 1.5-month high, as market players struggle for clear directions during early Monday. In doing so, the greenback’s gauge versus the six major currencies cheers the market’s risk-off mood, as well as the hawkish bias for the Federal Reserve (Fed), amid an inactive week-start due to the holidays in the US and Canada.

The sour sentiment could be linked to the fresh geopolitical tension surrounding North Korea, China and Russia.

During the weekend, North Korea fired two ballistic missiles toward Japan and renewed the fears that the hermit kingdom is up to something serious that can endanger the global economy, mainly due to the nature of the missiles fired as they both were termed as tactical nuclear attack weapons.

On the other hand, the US-China tensions are back on the table as the latest meeting between US Secretary of State Antony Blinken and China's top diplomat Wang Yi seemed to have failed in restoring the US-China ties. The reason could be linked to a Chinese diplomat’s comments saying that the US must change course and repair the damage done to Sino-US ties by indiscriminate use of force. On the same line, US ambassador to the United Nations, Ambassador Linda Thomas-Greenfield, said Sunday that China would cross a “red line” if the country decided to provide lethal military aid to Russia for its invasion of Ukraine.

Elsewhere, the firmer prints of the US Consumer Price Index (CPI) and Retail Sales followed the previously flashed upbeat readings of employment and output data and propelled the odds of the US economy witnessing more inflation ahead. The same joins hawkish Federal Reserve comments to underpin the firmer US Treasury bond yields and the US Dollar.

As per the latest Federal Reserve (Fed) talks, Fed Governor Michelle Bowman said, “We are seeing a lot of inconsistent data in economic conditions,” as reported by Reuters. On the contrary, Richmond Fed President Thomas Barkin said that they are seeing some progress on inflation with demand normalizing, as reported by Reuters.

While portraying the sentiment, the S&P 500 Futures print mild losses even as Wall Street closed mixed. It’s worth noting that the US 10-year Treasury bond yields rose to the highest levels since early November in the last week and helped the DXY to print a three-week uptrend.

Moving on, the monetary policy meeting minutes by the Federal Reserve (Fed), up for publishing on Wednesday, will precede Thursday’s second reading of the US fourth quarter (Q4) Gross Domestic Product to direct immediate DXY moves.

Technical analysis

Unless declining back below the previous resistance line from late November 2022, now support near 103.30, the US Dollar Index (DXY) remains on the bull’s radar.