US Dollar Index stays bid around 96.00 ahead of Fed

• DXY keeps the buying interest unchanged near 96.00.
• US yields remain vigilant ahead of the FOMC event.
• Consensus expects the Fed’s message to fall on the hawkish side.

The US Dollar Index (DXY), which gauges the greenback vs. a bundle of its main rivals, extends the weekly optimism around the 96.00 zone ahead of the FOMC gathering midweek.

US Dollar Index: Mind the “sell the fact” reaction

The index keeps the rebound from 2022 lows (January 14) well in place, this time aided by the mild uptick in US yields and sustained further by escalating geopolitical tensions.

Indeed, the recent strong advance in the dollar was accompanied by rising speculation of a Fed’s lift-off in March along with an intense move higher in US yields. However, much of the next steps by the Fed seems to be priced in and therefore this could spark a corrective move in the buck in case the Committee (or Powell) fails to surprise investors later on Wednesday.

In the docket, MBA Mortgage Applications contracted 7.1% in the week to January 21, while advanced trade balance figures showed the deficit is expected to widen to $101B in December.

Next on tap in the US calendar will be the December New Home Sales along with the EIA’s weekly report on US crude oil stockpiles.

US Dollar Index relevant levels

Now, the index is gaining 0.10% at 96.05 and a break above 96.27 (weekly high Jan.27) would open the door to 96.46 (2022 high Jan.4) and finally 96.93 (2021 high Nov.24). On the flip side, the next down barrier emerges at 94.89 (100-day SMA) followed by 94.62 (2022 low Jan.14) and then 93.27 (monthly low Oct.28 2021).