US Dollar Index (DXY): Advances sharply and reclaims 103.000 post ECB’s decision, ahead of US inflation data

• The US Dollar Index (DXY) rose to fresh three-week highs, above 103.000.
• A negative sentiment boosted the US Dollar as investors scrambled toward safe-haven assets.
• US Dollar Index (DXY): To re-test the YTD highs in the medium-term.

The US Dollar Index, a measure of the greenback’s performance against a basket of six currencies, climbs sharply by 0.74% and is sitting at 103.306 at the time of writing, as the Asian Pacific session begins.

Risk-aversion is the name of the game in the financial markets. Another central bank, the ECB, decided to keep rates unchanged at -0.50% but signaled that it would begin to raise rates, starting as soon as July. The decision triggered an upward reaction in the EUR/USD but plummeted afterward, boosting the prospects of the greenback.

Therefore, risk appetite waned, as shown by global equities finishing Thursday’s session with losses. US Treasury yields are rising, led by the 10-year benchmark note rate, solid at 3.047%, underpinning the US Dollar.

The US economic calendar reported Initial Jobless Claims for the week ending on June 4, on Thursday. Albeit the reading rose by 229K more than the 210K, it was ignored by investors, as their focus is on the Consumer Price Index, expected to top 8.3% YoY expectations. Moreover, the University of Michigan Consumer Sentiment June’s preliminary number would give traders insight into US citizens regarding their current economic conditions.

US Dollar Index (DXY): Technical outlook

The US Dollar Index bottomed at the 50-day moving average (DMA) at around 101.297 on May 30. Since then, the index began trending higher, with a pair of pullbacks that were offset by upward days that lifted the DXY to fresh multi-week highs. That said, the US Dollar Index remains poised for further gains but would face some hurdles on its way north.

The US Dollar Index’s first resistance would be the May 19 high at 103.877. A breach of the latter would expose the May 17 daily high at 104.230, followed by the YTD high at 105.005.