US Dollar Index regains the smile and approaches 96.00

• DXY leaves behind Friday’s downtick and eyes 96.00.
• US yields start the week on a mild positive mood.
• Construction Spending, final Manufacturing PMI next on tap.

The greenback, when tracked by the US Dollar Index (DXY), regains the upside traction and trades closer to the 96.00 mark at the beginning of the week.

US Dollar Index looks to data, yields

The index manages to rebound from Friday’s 4-week lows in the 95.60/55 band amidst some tepid recovery in US yields, re-shifting the attention to the key 96.00 yardstick on Monday.

Indeed, the dollar reverses Friday’s pullback in the first session of the new year helped by the soft stance in the risk complex ahead of the opening bell in the old continent.

Later in the US docket, Markit will publish its final reading for the Manufacturing PMI for the month of December along with Construction Spending figures during November.

What to look for around USD

Renewed weakness around the greenback dragged the US Dollar Index (DXY) to fresh monthly lows in the sub-96.00 area on Friday. The muted activity in the US cash markets coupled with month/quarter/year-end flows left the buck vulnerable and exposed it to further decline. As markets slowly return to normality, the dollar is expected to remain propped up by the Fed’s intentions to hike rate as soon as in H2 2022, the persevering elevated inflation, supportive Fedspeak and the solid performance of the US economy.

Key events in the US this week: Final December Manufacturing PMI (Monday) - ISM Manufacturing PMI (Tuesday) - ADP Report, FOMC Minutes (Wednesday) - Initial Claims, ISM Non-Manufacturing, Factory Orders (Thursday) - Nonfarm Payrolls, Unemployment Rate (Friday).

Eminent issues on the back boiler: Start of the Fed’s tightening cycle. US-China trade conflict under the Biden’s administration. Debt ceiling issue. Potential geopolitical effervescence vs. Russia and China.

US Dollar Index relevant levels

Now, the index is gaining 0.24% at 95.89 and a break above 96.39 (weekly top Dec.29) would open the door to 96.90 (weekly high Dec.15) and finally 96.03 (2021 high Nov.24). On the flip side, the next down barrier emerges at 95.57 (monthly low Dec.31) followed by 95.51 (weekly low Nov.30) and then 94.96 (weekly low Nov.15).