US Dollar Index resumes the downside, back to 95.60

The greenback, in terms of the US Dollar Index (DXY), reverses Thursday’s uptick and returns to the 95.60 region, all amidst the renewed consolidative mood.

US Dollar Index looks to risk trends, yields

The index extends the consolidation in the upper end of the recent range, coming under some selling pressure after failing around the 95.80 region once again.

The retracement in the dollar echoes another so far negative session in the US money markets, where yields extend their corrective move lower. Yields of the key 10y benchmark note have returned to the sub-1.80% level, some 10 bps down from recent tops just past 1.90% (January 19).

In the meantime, the greenback seems to lack conviction to retest/surpass the key barrier at 96.00 the figure based on the idea that much of the Fed’s tightening this year, including a rate hike in March, appears to be already priced in among investors.

On the US data sphere, the only release will be the Conference Board’s Leading Index for the month of December.

What to look for around USD

The dollar index came under some downside pressure soon after recent peaks near 95.90. In fact, the recovery from as low as the 94.60 area (January 14) almost fully reclaimed the ground lost earlier in the new year, always on the back of the sharp move higher in US yields, firmer speculation of a sooner move on rates by the Federal Reserve, supportive Fedspeak and the strong march of the US economic recovery.

Key events in the US this week: CB Leading Index (Thursday).

Eminent issues on the back boiler: Start of the Fed’s tightening cycle. US-China trade conflict under the Biden administration. Debt ceiling issues. Potential geopolitical effervescence vs. Russia and China.

US Dollar Index relevant levels

Now, the index is losing 0.13% at 95.64 and a break above 95.83 (weekly high Jan.18) would open the door to 96.46 (2022 high Jan.4) and finally 96.93 (2021 high Nov.24). On the flip side, the next down barrier emerges at 94.81 (100-day SMA) followed by 94.62 (2022 low Jan.14) and then 93.27 (monthly low Oct.28 2021).