US Dollar Index rebounds from weekly low to pierce 104.00, Fed Chair Powell eyed

• US Dollar Index pares weekly losses, snaps two-day downtrend amid sluggish session.
• Yields remain pressured but fears of hawkish central banks calling recession seem to renew US dollar demand.
• US Industrial Production for May, Fed’s bi-annual Monetary Policy Report and Powell’s speech could provide fresh impetus.

US Dollar Index (DXY) takes the bids to refresh its intraday high around 104.00 while posting the first daily gain in three during Friday’s Asian session. The greenback’s latest run-up could be linked to the market’s indecision amid a light calendar, as well as the cautious mood ahead of Fed’s bi-annual Monetary Policy Report and Fed Chairman Jerome Powell’s speech.

The greenback gauge posted the biggest daily loss in a month the previous day as downbeat US Treasury yields joined softer US data. US 10-year Treasury yields dropped during the last two consecutive days, to 3.243% at the latest as the Fed’s 0.75 rate increase couldn’t impress bulls.

On the other hand, US Building Permits and Housing Starts eased in May to 1.695M and 1.549M respectively while the Initial Jobless Claims 4-week average inched up to 218.5K versus 215K expected during the period ended on June 10. Further, Philadelphia Fed Manufacturing Survey printed a negative figure of -3.3 for June, the first such contraction since May 2020.

It’s worth noting, however, that aggressive momentary policy actions from the US Federal Reserve (Fed), Swiss National Bank (SNB) and Bank of England (BOE) seem to renew fears surrounding the global recession. The same should have weighed on the riskier assets and underpinned the US dollar but could not.

While portraying the mood, the S&P 500 Futures print 0.30% intraday gains after losing around 3.25% on Wall Street.

Looking forward, traders appear to be in a dilemma over the US dollar’s latest moves amid a quiet session. As a result, the upcoming catalysts should gain major attention for near-term trade directions. Among them, the US Industrial Production for May, expected at 0.4% versus 1.1% prior, will be the first to entertain traders ahead of the Fed’s Monetary Policy Report and Powell’s speech.

Technical analysis

The 10-DMA restricts the immediate downside of the US Dollar Index to around 103.80 but recovery moves need validation from May’s top of 105.00 to convince buyers.