US Dollar Index regains the smile near 101.80, looks to data

• DXY bounces off lows and revisits the 101.80 area.
• US yields trade on a mixed note as US markets return to normality.
• Housing data, Consumer Confidence next on tap in the docket.

The greenback, when tracked by the US Dollar Index (DXY), regains some composure and manages to rebound from Monday’s 5-week lows near 101.30.

US Dollar Index now looks to data

The index reverses three consecutive daily pullbacks and attempts a bounce to the vicinity of the 102.00 neighbourhood, where some resistance seems to have turned up so far.

While US markets return to normality following Monday’s Memorial Day holiday, yields trade on a mixed performance, with the short end of the curve struggling to get some upside traction and the belly and the long end advancing modestly.

Later in the NA session, the FHFA’s House Price Index is due seconded by the Consumer Confidence gauged by the Conference Board.

What to look for around USD

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

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: House Price Index, CB Consumer Confidence (Tuesday) – 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 0.27% at 101.63 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 101.15 (55-day SMA) and then 99.81 (weekly low April 21).