US DOLLAR INDEX PUSHES HIGHER AND TARGETS 102.00

• DXY adds to Tuesday’s gains and approaches 102.00.
• US yields resume the uptrend along the curve.
• US ISM Manufacturing, Fed’s Beige Book next on tap.

The greenback, when tracked by the US Dollar Index (DXY), extends the bounce off Monday’s multi-week lows and looks to regain the area beyond the 102.00 mark midweek.

US DOLLAR INDEX LOOKS TO RISK TRENDS, DATA

The index advances for the second session in a row and flirts with the 102.00 neighbourhood in a context where the risk complex remains on the defensive and US yields regain composure.

Indeed, the selling pressure gathers traction in the US bond markets and motivates yields to resume the upside along the curve. That said, the short end hovers around 2.60%, the belly approaches 2.90% and the long end retargets 3.10%.

Busy day in the US calendar, as weekly Mortgage Applications are due in the first turn seconded by final Manufacturing PMI, the ISM Manufacturing, Construction Spending and the Fed’s Beige Book.

In addition, NY Fed J.Williams (permanent voter, centrist) and St. Louis Fed J.Bullard (voter, hawk) are due to speak later in the NA session.

What to look for around USD

The dollar rebounds from recent multi-week lows as the risk rally seems to be taking a breather.

Renewed weakness in the dollar 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: MBA Mortgage Applications, Final Manufacturing PMI, ISM Manufacturing, Construction Spending, Fed Beige Book (Wednesday) – ADP Employment Change, Initial Claims, Factory Orders (Thursday) – Nonfarm Payrolls, Unemployment Rate, Final Services PMI, ISM Non-Manufacturing (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 advancing 0.20% at 101.98 and the breakout of 105.00 (2022 high May 13) would open the door to 105.63 (high December 11 2002) and finally 106.00 (round level). On the other hand, the next support emerges at 101.29 (monthly low May 30) seconded by 101.22 (55-day SMA) and then 99.81 (weekly low April 21)