US Dollar Index falters around 99.00 ahead of data

• DXY’s rebound failed to close above the 99.00 mark.
• US yields regain some composure on Tuesday.
• ISM Non-Manufacturing, Services PMI next on tap.

The greenback, in terms of the US Dollar Index (DXY), faces some downside pressure in the vicinity of the 99.00 neighbourhood on turnaround Tuesday.

US Dollar Index looks to geopolitics, Fed, data

After three consecutive daily advances, the upside momentum in the dollar seems to have run out of steam around the key 99.00 barrier on Tuesday.

In the meantime, US yields resume the upside albeit at a gradual pace amidst increasing cautiousness among investors following the recent inversion of the US yield curve.

The absence of fresh headlines from the war in Ukraine as well as non-existent progress from the ongoing peace talks between both parties look to limit the downside in the greenback for the time being, while persistent speculation of a more aggressive rate path by the Fed in the next months also collaborates with the broad-based constructive view in the buck.

In the US data space, February Trade Balance figures are due in the first turn seconded by the final Services PMI and the publication of the ISM Non-Manufacturing for the month of march.

Additionally, FOMC’s L.Brainard (permanent voter, dovish), Minneapolis Fed N.Kashkari (2023 voter, centrist) and NY Fed J.Williams (permanent voter, centrist) are all due to speak later in the NA session.

What to look for around USD

The dollar managed to regain strong upside traction after bottoming out in the 97.70 region in the second half of last week. In the meantime, the near-term price action in the greenback continues to be dictated by geopolitics, while the case for a stronger dollar in the medium/long term remains well propped up by the current elevated inflation narrative, a potential more aggressive tightening stance from the Fed, higher US yields and the solid performance of the US economy.

Key events in the US this week: Balance of Trade, Final Services PMI, ISM Non-Manufacturing (Tuesday) – MBA Mortgage Applications, FOMC Minutes (Wednesday) – Initial Claims, Consumer Credit Change (Thursday) – Wholesale Inventories (Friday).

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

US Dollar Index relevant levels

Now, the index is down 0.09% 98 89 and faces the next support at 97.68 (weekly low March 30) seconded by 97.23 (55-day SMA) and then 96.69 (100-day SMA). On the other hand, a break above 99.36 (weekly high March 28) would open the door to 99.41 (2022 high March 7) and finally 100.00 (psychological level).