US Dollar Index pushes higher and surpasses 103.00, new 5-year highs

• DXY gathers extra steam and surpasses 103.00.
• Flash results saw a $125.32B trade deficit in March.
• US yields remain on the positive territory so far on Wednesday.

The greenback, when gauged by the US Dollar Index (DXY), navigates in levels last seen more than five years ago past the 103.00 mark on Wednesday.

US Dollar Index in multi-year highs

The rally in the index stays unabated and now surpasses 103.00 the figure for the first time since January 2017, as the sentiment around the buck remains solid and propped up by investors’ conviction of a Fed’s tighter monetary policy stance.

The latter also appears underpinned by the daily improvement in US yields, while the CME Group’s FedWatch Tools continues to signal the probability of a 50 bps rate hike at almost 95% at the May 4 event.

In the US calendar, MBA Mortgage Applications contracted 8.3% in the week to April 22 and preliminary trade data showed a $125.32B deficit for the month of March. Later in the session, Pending Home Sales are also due.

What to look for around USD

The dollar picks up extra pace and surpasses the key 103.00 barrier in quite a convincing fashion so far on Wednesday. Persevering risk aversion, geopolitics and the bounce in US yields all collaborate with the upside momentum in the buck. In the meantime, the likelihood of a tighter adjustment to the Fed’s monetary conditions continues to be the main driver behind the sharp move higher in the index in past sessions, which also appears reinforced by current elevated inflation narrative and the solid health of the labour market.

Key events in the US this week: MBA Mortgage Applications, Flash Goods Trade Balance, Pending Home Sales (Wednesday) – Advanced Q1 GDP Growth Rate, Initial Claims (Thursday) – Core PCE, PCE, Final Consumer Sentiment, Personal Income/Spending (Friday).

Eminent issues on the back boiler: Escalating geopolitical effervescence vs. Russia and China. Fed’s rate path this year. US-China trade conflict. Future of Biden’s Build Back Better plan.

US Dollar Index relevant levels

Now, the index is advancing 0.67% at 102.98 and the breakout of 103.10 (2022 high April 27) would open the door to 103.82 (2017 high January 3) and finally 104.00 (round level). On the other hand, initial contention emerges at 99.81 (weekly low April 21) seconded by 99.57 (weekly low April 14) and then 97.68 (weekly low March 30).