US Dollar Index resumes the upside above 103.00 ahead of key data

• The index leaves behind Friday’s pullback and retakes 103.00
• US yields add to the recent uptick and extend the march further north.
• ISM Manufacturing will be the salient event later in the NA session.

The US Dollar Index (DXY), which gauges the greenback vs. a bundle of its main competitors, regains upside traction and advances past the 103.00 mark at the beginning of the week.

US Dollar Index looks to yields, Fed, data

The index quickly reverses Friday’s decline and resumes the strong upside above the 103.00 mark on Monday.

The dollar saw its upside particularly exacerbated in April in response to the hawkish message from Fed’s rate-setters as well as Chief Powell, which opened the door to a more aggressive normalization of the monetary conditions.

On the latter, a 50 bps interest rate hike is already priced in at the FOMC gathering later in the week, while market participants continue to see an extra six or seven hikes in the next months.

The upside bias in the buck remains well supported by the march higher in US yields, where the 10y benchmark note yields approach the key 3.00% mark and the short end of the curve flirt with an area last visited more than three years ago near 2.80%.

Later in the NA session, the ISM Manufacturing for the month of April will be in the limelight seconded by Construction Spending and the final S&P Global Manufacturing PMI. In addition, there will be a 3m and 6m Bill Auctions.

What to look for around USD

The dollar regains the smile following Friday’s retracement and aims at a potential test of the recent cycle peaks just below 104.00 the figure (April 28). The Fed’s more aggressive rate path continues to be the main driver behind the robust bullish stance in the dollar, which also appears reinforced by the current elevated inflation narrative and the solid health of the labour market. Collaborating with the latter appear bouts of geopolitical tensions as well as the move higher in US yields.

Key events in the US this week: ISM Manufacturing, Final Manufacturing PMI (Monday) – Factory Orders (Tuesday) – Mortgage Applications, ADP Report, Balance of Trade, Final Services PMI, ISM Non-Manufacturing, FOMC Meeting (Wednesday) – Initial Claims (Thursday) – Nonfarm Payrolls, Unemployment Rate, Consumer Credit Change (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 0.03% at 103.24 and the breakout of 103.92 (2022 high April 28) would open the door to 104.00 (round level) and finally 105.63 (high December 11 2002). On the other hand, the next support emerges at 99.81 (weekly low April 21) seconded by 99.57 (weekly low April 14) and then 97.68 (weekly low March 30).