US Dollar Index advances to new cycle tops near 100.50

• DXY’s rally now flirts with the 100.50 region midweek.
• US yields resume the upside following Tuesday’s correction.
• Mortgage Applications, Producer Prices next on tap in the docket.

The US Dollar Index (DXY), which gauges the greenback vs. its main competitors, keeps pushing higher and trades near the 100.50 region on Wednesday.

US Dollar Index in levels last seen in May 2020

The index extends the positive streak for the tenth session on Wednesday and navigates an area last seen back in May 2020 in the mid-100.00s, always underpinned by the firmer expectations of a tighter normalization by the Federal Reserve in the next months.

On the latter, Richmond Fed T.Barkin advocated for a quicker move to the neutral rates, while St. Louis Fed J.Bullard suggested that neutral rates appear insufficient to bring down inflation.

In the US cash markets, in the meantime, yields resume the upside following Tuesday’s drop after US inflation figures rose at the fastest pace since 1981 in March. Despite the uptick of consumer prices, investors appear to start perceiving that the inflation pressures could be losing some traction and that the peak could be close.

In the US data space, usual weekly Mortgage Applications tracked by MBA are due in first turn seconded by Producer Prices for the month of March.

What to look for around USD

The dollar extends the march further north of the 100.00 mark to levels last seen nearly two years ago. So far, the greenback’s price action continues to be dictated by the likeliness of a tighter rate path by the Fed and geopolitics. In addition, the case for a stronger dollar remains well propped up by the current elevated inflation narrative, higher US yields and the solid performance of the US economy.

Key events in the US this week: MBA Mortgage Applications, Producer Prices (Wednesday) – Retail Sales, Initial Claims, Business Inventories, Flash Consumer Sentiment (Thursday) – Industrial Production, TIC Flows (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 advancing 0.19% at 100.50 and a break above 100.55 (monthly high May 14 2020) would aim to 100.86 (high April 24 2020) and finally 100.93 (monthly high April 11 2020). On the downside, initial contention is seen at 97.68 (weekly low March 30) seconded by 96.94 (100-day SMA) and then 95.67 (weekly low February 16).