US DOLLAR INDEX: BULLS EXTEND THE MARCH NORTH AND NOW TARGET 103.00

• DXY extends the upside to new 2-week highs near 102.70.
• US yields shed some ground following Monday’s strong advance.
• Balance of Trade, Consumer Credit Change next on tap.

The greenback, in terms of the US Dollar Index (DXY), clinches new 2-week highs in the 102.70 region on turnaround Tuesday.

US DOLLAR INDEX BOLSTERED BY YIELDS, WAITS FOR CPI

The index advances for the third session in a row on the back of the soft note in the risk complex, while the recent strong bounce in US yields also collaborated with the dollar’s upside.

On the latter, yields in the short end of the curve advanced to multi-week highs past 2.75%, the belly surpassed the key 3.00% mark and the long end flirted with the 3.20% region, all in response to renewed speculation surrounding the Fed’s move on rates in the next couple of meetings.

In the US calendar, trade balance figures are due seconded by Consumer Credit Change.

What to look for around USD

The index regained the firm pace and reclaimed the area north of the key 102.00 yardstick in recent sessions.

The dollar’s weakness seen in mid-May came in response to the rising perception that inflation might have peaked in April, which in turn supports the idea that the Fed may not need to be as aggressive as market participants expect when it comes to raising the Fed Funds rates.

In the meantime, the Fed’s divergence vs. most of its G10 peers coupled with bouts of geopolitical effervescence, higher US yields and a potential “hard landing” of the US economy are all factors still supportive of a stronger dollar in the next months.

Key events in the US this week: Balance of Trade, Consumer Credit Change (Tuesday) – MBA Mortgage Applications, Wholesale Inventories (Wednesday) – Initial Claims (Thursday) – Inflation Rate, Flash Consumer Sentiment, Monthly Budget Statement (Friday).

Eminent issues on the back boiler: Powell’s “softish” landing… what does that mean? Escalating geopolitical effervescence vs. Russia and China. Fed’s more aggressive rate path this year and 2023. US-China trade conflict. Future of Biden’s Build Back Better plan.

US Dollar Index relevant levels

Now, the index is gaining 0.08% at 102.49 and a break above 102.83 (monthly high June 7) would open the door to 105.00 (2022 high May 13) and finally 105.63 (high December 11 2002). On the other hand, the next contention emerges at 101.52 (55-day SMA) followed by 101.29 (monthly low May 30) and then 99.81 (weekly low April 21).