US Dollar Index bulls approach fortnight high around 105.00, US ISM PMI in focus

• DXY consolidates the biggest daily loss in a fortnight.
• Fears of US recession joined downbeat data to weigh on the greenback before the latest rebound.
• Rebound in US Treasury yields offer extra strength to the US dollar.
• US ISM Manufacturing PMI, chatters over economic slowdown appear important for fresh impulse.

US Dollar Index (DXY) picks up bids to refresh its intraday high around 105.00, after falling the most in two weeks the previous day. The greenback gauge appears to trace the US Treasury yields while bouncing off the fortnight low during Friday’s Asian session.

In doing so, the DXY seems to cheer the broad risk of global slowdown as well as the market’s anxiety ahead of the key US ISM Manufacturing PMI for June, expected 55.0 versus 56.1 prior.

The downbeat US personal spending and softer prints of the Fed’s preferred inflation gauge raised concerns over the health of the world’s largest economy and drowned the US dollar on Thursday. The greenback’s previous retreat could also be linked to the downbeat US Treasury yields as the benchmark 10-year bond coupons dropped below 3.0%, before bouncing off to 3.01% at the closing, to portray around 50 basis points (bps) of a fall from June’s peak.

While portraying the mood, the S&P 500 Futures remain pressured for the fifth consecutive day around a one-week low.

Talking about the data, the US Personal Income for May matched market forecasts and upwardly revised figures of 0.5% MoM but Personal Spending dropped to a three-month low, to 0.2% versus 0.5% expected and 0.6% downwardly revised previous readings. Further, the Personal Consumption Expenditure (PCE) Price Index reprinted 6.3% YoY figures for May.

More importantly, the Core PCE Price Index, the Fed’s preferred inflation gauge, matched expectations of 4.7% YoY versus 4.9% prior.

Having witnessed the return of the US dollar buyers, the traders should wait for the US ISM Manufacturing PMI for June to better forecast the moves. Also important will be the chatters surrounding inflation and recession.

Technical analysis

Unless providing a daily closing below the 21-DMA, surrounding $104.00 by the press time, US Dollar Index is likely staying on the way to refresh the yearly top, currently around 105.80.