US Dollar Index advances past 99.00 to new 2002 highs

• DXY remains well bid around 99.00 on geopolitical jitters.
• US yields regain some composure across the curve on Monday.
• Markets’ attention remains focused on developments from Ukraine.

The greenback, in terms of the US Dollar Index (DXY), extends the rally further and surpasses the 99.00 barrier at the beginning of the week.

US Dollar Index stronger on risk aversion

The acute upside in the greenback remains well and sound for the third session in a row and reaches levels last traded back in late May 2020 on Monday.

The continuation of the rally in the buck remains well underpinned by the worsening conditions in the Russia-Ukraine military conflict and the solid sentiment surrounding the risk aversion.

Furthermore, the move higher in the dollar so far comes in tandem with a tepid rebound in US yields following the recent weakness and the sharp flattening, which was in turn motivated by the solid buying interest seen in bonds.

In the US data space, the only release will be January’s Consumer Credit Change.

What to look for around USD

The index clocked new cycle peaks beyond the 99.00 barrier at the beginning of the week, always in response to increasing geopolitical concerns in Ukraine. The persevering bias towards the safe haven universe is predicted to keep supporting the dollar and the rest of its peers in the current context for the time being. Also supportive of the stronger buck appears the current elevated inflation narrative, the start of the Fed’s normalization of its monetary conditions later this month and the solid performance of the US economy. In the longer run, the renewed hawkish views from the BoE and the ECB carry the potential to undermine the expected move higher in the dollar.

Key events in the US this week: Consumer Credit Change (Monday) – Balance of Trade, Wholesale Inventories (Tuesday) – MBA Mortgage Applications (Wednesday) – CPI, Core CPI, Initial Claims, Monthly Budget Statement, Fed Quarterly Financial Accounts (Thursday) – Flash Consumer Sentiment (Friday).

Eminent issues on the back boiler: Escalating geopolitical effervescence vs. Russia and China. Fed’s rate path this year. US-China trade conflict under the Biden administration.

US Dollar Index relevant levels

Now, the index is gaining 0.44% at 98.94 and a break above 99.21 (2022 high Mar.7) would open the door to 99.97 (high May 25 2020) and finally 100.00 (psychological mark). On the flip side, the next down barrier emerges at 97.44 (monthly high Jan.28) followed by 96.17 (55-day SMA) and then 95.67 (weekly low Feb.16).