US Dollar Index clings to the 105.00 region ahead of key data

• DXY keeps the trade near recent peaks around 105.00.
• US yields extend the corrective downside on Thursday.
• PCE, Initial Claims next of relevance in the docket.

The US Dollar Index (DXY), which tracks the greenback vs. a bundle of its main competitors, alternates gains with losses in the 105.00 neighbourhood on Thursday.

US Dollar Index focuses on data

The index looks to add to the recent advance beyond 105.00 the figure in the second half of the week amidst so far alternating risk appetite trends and the persistent decline in US yields across the curve.

Recent gains in the dollar were sustained by the re-emergence of the risk aversion among market participants, particularly following rising concerns over a probable global slowdown/US recession derived from the tighter monetary conditions carried on by the Federal Reserve and other major central banks, always amidst the unabated march higher in inflation.

Quite interesting session in the US docket, as inflation tracked by the PCE is due for the month of June seconded by usual weekly Claims, Personal Income and Personal Spending.

What to look for around USD

Renewed risk-off sentiment motivated the index to reclaim the area above the 105.00 mark on Wednesday despite US yields continue to trend lower.

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 suggesting a stronger dollar in the next months.

Key events in the US this week: PCE, Core PCE, Personal Income, Personal Spending, Initial Claims (Thursday) – ISM Manufacturing, Final Manufacturing PMI (Friday).

Eminent issues on the back boiler: Hard/soft/softish? landing of the US economy. 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 down 0.07% at 105.02 and faces the next contention at 103.67 (weekly low June 27) seconded by 103.41 (weekly low June 16) and finally 101.29 (monthly low May 30). On the other hand, a break above 105.18 (weekly high June 30) would expose 105.78 (2022 high June 15) and then 107.31 (monthly high December 2002).