US Dollar Index stays on the defensive around 98.60

• DXY remains unable to regain upside traction on Friday.
• US yields reverse the initial drop and resume the uptrend.
• US Final Consumer Sentiment missed expectations at 59.4.

Sellers keep dictating the price action in the greenback, with the US Dollar Index (DXY) navigating the mid-98.00s in a context favourable to the riskier assets.

US Dollar Index appears capped by 99.00

Despite the negative performance, the index at least managed to bounce off daily lows in the 98.40 region, as the downside seems somewhat contained amidst persistent uncertainty in the geopolitical scenario.

The U-turn in US yields also appears to have pushed the buck from daily lows. Indeed, yields across the curve not only left behind the initial cautious stance but are also navigating in fresh highs at the time of writing.

In the US calendar, final prints of the U-Mich Index saw the Consumer Sentiment deflate to 59.4 for the current month, while Pending Home Sales contracted 5.4% in the year to February.

At his speech on Friday, NY Fed J.Williams subscribed to the view that future rate hikes remain data dependent.

What to look for around USD

The weekly recovery in the dollar failed to advance further north of the 99.00 mark, motivating sellers to return to the market on Friday. Concerns surrounding the geopolitical landscape are expected to keep propping up the demand for the buck in combination with prospects of extra tightening by the Fed. Looking at the broader picture, bouts of risk aversion – exclusively emanating from Ukraine - should underpin inflows into the safe havens and lend legs to the dollar at a time when its constructive outlook remains well supported by the current elevated inflation narrative, a potential more aggressive tightening stance from the Fed and the solid performance of the US economy.

Key events in the US this week: Final Consumer Sentiment, Pending Home Sales (Friday).

Eminent issues on the back boiler: Escalating geopolitical effervescence vs. Russia and China. Fed’s rate path this year. US-China trade conflict. Futures of Biden’s Build Back Better plan.

US Dollar Index relevant levels

Now, the index is retreating 0.15% at 98.62 and a break above 98.96 (weekly high March 22) would open the door to 99.29 (high March 14) and finally 99.41 (2022 high March 7). On the flip side, the next down barrier emerges at 97.72 (weekly low March 17) followed by 97.71 (weekly low March10) and then 97.44 (monthly high January 28).