US Dollar Index: DXY bears approach 104.00 with eyes on Fed Chair Powell’s Testimony

• US Dollar Index holds lower grounds after declining in the last two consecutive days.
• Upbeat data, corrective bounce in yields failed to impress DXY bulls amid mixed Fed talks, quiet markets.
• Fed Chair’s Testimony eyed to confirm the ‘higher for longer’ rates.

US Dollar Index (DXY) remains on the back foot for the third consecutive day as it slides towards 104.00 during early Tuesday, pressured near 104.25 by the press time. In doing so, the greenback’s gauge versus the six major currencies traces the US Treasury bond yields amid a sluggish session ahead of the key Testimony from Federal Reserve (Fed) Chairman Jerome Powell.

On Monday, US 10-year Treasury bond yields initially dropped to a one-week low of 3.897% before ending the day with mild gains near 3.96%, staying around the same level by the press time. On the same line, the two-year counterpart ended Monday’s North American trading session with 0.60% intraday gains at 4.88%, mostly unchanged at the latest.

It should be noted that the improvement in the US Factor Orders for January, to -1.6% MoM versus -1.8% expected and -1.7% prior, could be considered as a catalyst behind the previous rebound in the US Treasury bond yields. That said, the cautious mood ahead of this week’s key event might have allowed the bond coupons to remain depressed.

On a different page, mixed headlines from China’s annual session of the National People's Congress (NPC) and fears of more Sino-American tension, amid the likely meeting of the US and Taiwanese Officials, seem to weigh on the sentiment amid sluggish trading hours.

It’s worth mentioning that softer prints of the second-tier US data, including ISM PMIs, Consumer Confidence and Durable Goods Orders joined comments from Atlanta Fed President Raphael Bostic to renew concerns about the policy pivot and weighed on the DXY in the last week.

Amid these plays, Wall Street closed mixed and the S&P 500 Futures also struggle for clear directions.

Looking ahead, China’s monthly trade numbers and headlines from the NPC can entertain DXY traders ahead of the semi-annual Testimony of Federal Reserve (Fed) Chairman Jerome Powell. Fed’s Powell appears before the Senate Banking Committee on Tuesday and should defend the US central bank’s hawkish bias to recall the US Dollar bulls.

Technical analysis

A convergence of the 21-day and 50-day Exponential Moving Averages (EMAs), around 104.00, appears a tough nut to crack for the DXY bears. That said, impending bear cross on the MACD joins the previous week’s downside break of an upward-sloping trend line from early February, around 105.75 by the press time, to keep sellers hopeful.