- DXY picks up traction and bounces off lows near 97.70.
- US yields extend the corrective downside on Friday.
- Fedspeak, housing data next of note in the docket.
The greenback, in terms of the US Dollar Index (DXY), manages to regain some buying interest and moves beyond the 98.00 hurdle at the end of the week.
US Dollar Index looks to geopolitics, data
The index attempts a mild recovery after four consecutive daily retracements on Friday, as the risk complex gives away part of the recent strong advance and geopolitical concerns appear to have returned to the markets.
The perceived pick up in the risk aversion lends legs to the greenback and favours the demand for bonds, which in turn morph into another negative performance of US yields along the curve.
Later in the session, market participants are expected to closely follow the call between President Biden and China’s Xi Jinping regarding the war in Ukraine.
In the US data space, the CB Leading Index is due seconded by Existing Home Sales and speeches by Richmond Fed T.Barkin (2024 voter, centrist), Chicago Fed C.Evans (2023 voter, centrist) and FOMC Governor M.Bowman (permanent voter, centrist),
What to look for around USD
The index manages to bounce off recent sub-98.00 levels and trims part of the decline following the start of the tightening cycle by the Federal Reserve at its meeting on Wednesday. Concerns surrounding the geopolitical landscape seem to be propping up the demand for the buck along with the offered stance in the risk-associated complex. Looking at the broader picture, bouts of risk aversion – exclusively emanating from Ukraine - should prop up inflows into the safe havens and lent legs to the dollar at a time when its constructive outlook remains propped up by the current elevated inflation narrative, the Fed’s lift-off and the solid performance of the US economy.
Key events in the US this week: CB Leading Index, Existing Home Sales (Friday).
Eminent issues on the back boiler: Escalating geopolitical effervescence vs. Russia and China. Fed’s rate path this year. US-China trade conflict. Futures of Biden’s Build Back Better plan.
US Dollar Index relevant levels
Now, the index is up 0.20% at 98.21 and a break above 99.29 (high Mar.14) would open the door to 99.41 (2022 high Mar.7) and finally 99.97 (high May 25 2020). On the flip side, the next down barrier emerges at 97.72 (weekly low Mar.17) followed by 97.71 (weekly low Mar.10) and then 97.44 (monthly high Jan.28).
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