US Dollar Index resumes the downside, keeps the trade below 105.00

• DXY starts the week on the defensive in the low-104.00s.
• US markets are closed due to the Juneteenth holiday on Monday.
• Markets’ attention will be on Powell’s testimonies later in the week.

The greenback gives away part of Friday’s gains and recedes to the 104.30/20 region when tracked by the US Dollar Index (DXY) on Monday.

US Dollar Index looks to risk trends, Fed, yields

Sellers seem to have regained the upper hand around the greenback and force the index to shed some ground following Friday’s moderate bounce.

Indeed, after hitting fresh cycle peaks near 105.80 soon after the Federal Reserve hiked rates by the most since 1994 on June 15, the buck triggered a corrective move that has so far met initial contention in the 103.40 region (June 16).

The inactivity in the US markets is expected to keep trading conditions flat and volatility in marginal levels on Monday, leaving all the attention to the broad risk appetite trends when it comes to assets price action.

In the US data space, market participants will closely follow Powell’s Semiannual testimonies on Wednesday and Thursday along with speeches by several FOMC governors throughout the week.

What to look for around USD

The index came under pressure after climbing to new highs around 105.80 in the wake of the Fed’s 75 bps rate hike on June 15.

The dollar, in the meantime, remains well supported by the Fed’s divergence vs. most of its G10 peers (especially the ECB) in combination with bouts of geopolitical effervescence, higher US yields and a potential “hard landing” of the US economy, all factors supportive of a stronger dollar in the next months.

Key events in the US this week: Chicago Fed National Activity Index, Existing Home Sales (Tuesday) – MBA Mortgage Applications, Powell’s Semiannual Testimony (Wednesday) – Initial Claims, Flash PMIs, Powell’s Semiannual Testimony (Thursday) – Final Consumer Sentiment (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 losing 0.21% at 104.43 and faces the next support at 102.45 (55-day SMA) followed by 101.29 (monthly low May 30) and then 100.16 (100-day SMA). On the other hand, a break above 105.78 (2022 high June 15) would open the door to 107.31 (monthly high December 2002) and finally 108.74 (monthly high October 2002).