US Dollar Index: Upbeat US data, hawkish Fed bets propel DXY bulls above 102.00

• US Dollar Index defends two-day rebound from one-year low, grinds higher of late.
• Upbeat US manufacturing, housing data joined hawkish Fed talks to underpin DXY run-up.
• Firmer US Treasury bond yields also allow US Dollar Index to remain sturdy ahead of the key US PMIs.
• Second-tier US housing data, Fedspeak may entertain intraday DXY traders.

US Dollar Index (DXY) grinds higher past 102.00, mildly bid near 102.10 by the press time of the mid-Asian session on Tuesday, as it defends the previous week’s recovery from the lowest levels in one year. In doing so, the US Dollar’s gauge versus the six major currencies remains downbeat for the third consecutive day amid hawkish Fed bets and upbeat US Treasury bond yields.

While tracing upbeat US Treasury bond yields and rising calls for the hawkish Fed move, the latest US data gains major attention. That said, the NY Empire State Manufacturing Index jumped to 10.8 for April while snapping the four-month downtrend, as well as marking the highest level since July last year. Further, the US National Association of Home Builders (NAHB) housing market index also rose for the fourth consecutive month in April to 45, versus 44 expected and prior reading.

Apart from the data, the Fed talks also allow the DXY to remain firmer as Richmond Fed President Thomas Barkin said on Monday that he wants to see more evidence of inflation settling back to target. The policymaker also added that he feels reassured by what he is seeing in the banking sector.

With the aforementioned data and Fed talks, the odds of witnessing another Fed rate hike in May, as well as a reduction in the market’s bets suggest a rate cut in the late 2023 increase. The same could be true for the US Treasury bond yields as the US 10-year and two-year bond coupons printed a three-day uptrend to 3.60% and 4.20% respectively.

It’s worth noting, however, that Wall Street closed on the positive side and hence may join the risk-on mood to prod the US Dollar bulls ahead of this week’s key US PMIs, up for publishing on Friday. Ahead of that, the US Housing Starts and Building Permits for March will also be important to watch. Elsewhere, talks of China’s faster economic recovery will be at the test as the Dragon Nation is up for releasing the first quarter (Q1) Gross Domestic Product (GDP) data and will be eyed closely for determining the market sentiment, which in turn affects the DXY.

Technical analysis

A daily closing beyond a one-month-old descending resistance line, around 102.45 by the press time, becomes necessary for the US Dollar Index bull’s conviction.